12 Democrats

In a rare moment of bipartisanship, 12 Democrats are reaching across the aisle to help Republicans loosen regulations on certain banks.

Even though former President Barack Obama signed the Dodd-Frank financial reform act into law just eight years ago, a dozen members of his party are now helping Republicans torpedo it for mid-size banks with assets ranging between $50 billion and $250 billion. To put that in perspective, Lehman Brothers — whose failure was arguably the domino that started the 2008 financial crisis — had liquid assets of $50 billion.

The Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), which is chiefly sponsored by Senator Mike Crapo (R-Idaho), would end up exempting these mid-size banks from Dodd-Frank’s Volcker Rule, which prohibits federally insured banks from having financial ownership or sponsorship of hedge funds and private equity funds. Before the Volcker Rule, banks would attempt to increase their profits by making short-term, high-risk investments in complex financial instruments like derivatives, securities, and commodity futures.

As history has shown, the $29 trillion bailout (roughly $11 trillion more than America’s total GDP in 2016) of big Wall Street banks was largely caused by the abrupt failure of mortgage-backed securities, which federally insured banks invested in partially on the advice of ratings agencies, which graded the risky investments as AAA despite home prices tumbling to 20 percent below 2006 peak levels. Even while investment bank Goldman Sachs was marketing these securities as safe investments to state pension funds like Mississippi’s Public Employees Retirement System, Goldman’s executives in the bank’s mortgage department privately confided to one another that they were “shitty.”

While S.2155 isn’t exempting megabanks like those who caused the financial crisis, it’s worth noting that even just several banks with just $50 billion in assets (The Fed funded $30 billion of Bear Stearns’ liquid assets to keep it afloat) could still cause a major economic catastrophe in the event of failure, meaning this bill and its support from these 12 Democrats could likely be what triggers another financial meltdown. And according to an IMF economist’s report published earlier this year, politicians undoing financial regulations that were put in place following a financial crisis often end up causing future financial crises.

Several of the 12 Democrats who are helping Republicans pave the way for the next financial crisis are up for re-election this year. One of these 12 is Senator Tim Kaine (D-Virginia) — Hillary Clinton’s running mate in the 2016 presidential election — who promised to rein in Wall Street if elected.

(EDITOR’S NOTE: Senators up for re-election in 2018 have their names in bold. Senators with no primary opponent have as asterisk next to their name.)

Senator Michael Bennet (D-Colorado)

Senator Tom Carper (D-Delaware)

Senator Chris Coons (D-Delaware)

Senator Joe Donnelly* (D-Indiana)

Senator Heidi Heitkamp (D-North Dakota)

Senator Doug Jones (D-Alabama)

Senator Tim Kaine* (D-Virginia)

Senator Joe Manchin (D-West Virginia)

Senator Claire McCaskill (D-Missouri)

Senator Gary Peters (D-Michigan)

Senator Jon Tester (D-Montana)

Senator Mark Warner (D-Virginia)

 

Carl Gibson is co-publisher of Grit Post. His work has previously been published in The Guardian, The Washington Post, The Houston Chronicle, Al-Jazeera America, and NPR, among others. Follow him on Twitter @crgibs or send him an email at carl at gritpost dot com.

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