Divisions within the Democratic Party were laid bare on Tuesday, as the Senate Banking Committee voted 16-7 to grant relief to some of the largest financial institutions in the country.
The left-wing of the party, led by Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.), questioned the merits of both the process and the substance of the legislative package, clashing with colleagues on both sides of the aisle.
Centrist Democrats, including Mark Warner (D-Va.), Heidi Heitkamp (D-N.D.) and Joe Donnelly (D-Indiana), defended their proposals as modest, good for rural America, and carefully-crafted with Republican colleagues.
The non-partisan nature of the deal, however, was seen by some of the seven left-leaning critics as evidence of Wall Street’s grip on Washington.
“What a shame, in the United States the Senate, the one place we can find room for bipartisanship is to give relief for financial institutions,” said Brian Schatz (D-Hawaii).
The lawmaker pointed out that increasing income inequality and record banking profitability demonstrate a clear lack of need for “regulatory relief.”
“I think that goes to a sickness in this institution, and I think this goes to a sickness in our society, where the one thing we can agree on is that banks need to be more profitable,” Schatz added.
While the majority of the bill’s text offers tailored relief to arcane financial regulations, one section contains a major revision of the framework crafted to encourage stability after last decade’s global banking collapse.
Specifically, the legislative language would remove a set of stricter rules for bank holdings companies with between $50 billion and $250 billion in assets.
Under Dodd-Frank financial reform, federal law treats banks with more than $50 billion in assets as “Systemically Important Financial Institutions.” Among other requirements, the designation forces them to explain to regulators how they would attempt to liquidate themselves, in the event of bankruptcy resulting from systemic shocks.
SIFI designations also enable two agencies–the Federal Reserve and the Federal Deposit Insurance Corporation–to force banks “to divest certain assets or operations,” if these plans aren’t credible. In other words, it enables regulators to break up part of banks.
Under the guidelines, the Fed and the FDIC are also empowered to “jointly impose more stringent capital, leverage, or liquidity requirements,” if a bank’s living will plans are deemed inadequate.
The reform legislation advanced on Tuesday says Congress approves of the Fed enhancing supervision on banks with more than $100 billion, but only through the agency rulemaking process—an avenue that doesn’t give regulators as much time to react to a rapidly-spreading panic.
If signed into law, the proposal would see less regulatory scrutiny for 25 banks with an aggregate $3.5 trillion in assets, according to an analysis cited by Public Citizen on Monday. The non-profit watchdog said that the firms received a combined $48 billion in bailout funds after last decade’s financial meltdown.
Democrats division on the Dodd-Frank rollback contrasted sharply with their united front in recent days against Republicans’ tax-cut proposal–a bill that was rushed through Congress, without a single hearing, showering disproportionate benefits on the rich, at great costs.
Sen. Warren hit out at an agreement between Republican and Democrat supporters–to vote against all amendments not included by a coalition assembled by the committee’s chair, Mike Crapo (D-Idaho.)
Brown, meanwhile, raised questions about regular order, bemoaning the lack of a committee hearing to examine the legislative package—the so-called “Economic Growth, Regulatory Relief, and Consumer Protection Act.”
Poking fun of the name, Brown at one point said: “as Meat Loaf used to sing: ‘two out of three ain’t bad.’ But this bill doesn’t even meet the Meat Loaf minimum.”
The reference caused more citations to the lyrics of the singer-songwriter—two in favor of the bill, by Sens. John Neely Kennedy (R-La.) and Thom Tillis (R-N.C.); and one against the legislation, by Sen. Chris Van Hollen (D-Md.)
Whether or not they quoted Meat Loaf, some centrist Democrats weren’t amused with criticism from the left. Sen. Heitkamp said individual proposals in the bill have been the subject of hearings before. Sen. Donnelly described critics as offering “falsities and rhetoric.”
Later, Brown responded to Heitkamp’s process claims by noting that the final bill, with some last-minute changes, was circulated before the committee an hour before voting.