Warren vows fight as US Senate begins debate on Dodd-Frank rewrite

There’s nothing to fear about modest banking reform

Republican, Democrat senators look to rewrite Elizabeth Warren's history

Texas Republican Rep. Jeb Hensarling tells CNN Tuesday the bill also helps smaller banks. Sherrod Brown, the top Democrat on the Senate Banking Committee.

The Senate is poised to pass a bill that would strip some of the regulations from the 2010 Dodd-Frank law, which was passed in the wake of the 2008 financial collapse.

Supporters of the bill, which is backed by Republican leadership and 13 Senate Democrats, argue it offers meaningful relief to small credit unions and regional banks without encouraging the risky gambles that contributed to the Wall Street meltdown about 10 years ago. They probably have outrage fatigue to thank for not getting greater pushback from their constituents, but it is still worth taking a look at some of the data points Democratic senators are using to justify their votes. Many of those senators are from states Trump won in 2016, and they face tough re-election fights in November.

Dodd-Frank was originally meant to increase transparency by implementing a consistent set of regulations aimed at closing loopholes and making firms accountable for their own mistakes. The legislation would increase the threshold at which banks are considered too big to fail and are subject to stricter regulations. Numerous regional banks stand to benefit from a provision that narrows the scope of institutions defined as "systemically important" under the Dodd-Frank Act. While there's "some consensus" it will help community banks, provisions were added "that help giant banks", which she argued "should not be regulated like a community bank".

Senate liberals opposed to the bill, and some regulatory experts, have charged that global megabanks with USA subsidiaries with under $250 billion in assets would also be spared from some of the toughest oversight measures required by Dodd-Frank.

Despite pushback from Warren and other progressive senators, about a dozen Democrats have joined Republicans in signing on as co-sponsors of the legislation, which would make several changes to regulations impacting lenders, consumers and the economy.

Under the bill being debated by the Senate, banks would not have to factor in the deposits they hold at a central bank when calculating that ratio.

In its current form, the bill appears to relax what is known as the supplementary leverage ratio for custodian banks - or a financial institution that protects assets like stocks and bonds for another financial firm and doesn't do retail banking.

Nearly from the start there were claims that the rules needed tweaking, especially when it came to treating small community banks the same as large national banks.

"If we lose the final vote ... we'll be paving the way for the next big crash", Warren said. The senator explained that it is likely unfair for community banks to endure heavy regulations imposed on large banks when they "don't pose" the same kind of threat to the economy if they endure a crisis.

"My first response to that is this bill is anything but a deregulation of Wall Street", Crapo said. Under Dodd-Frank, that asset threshold is $50 billion, which captures more banks.

"Understanding those risks is essential if we are to have a safer financial system than the one we had before the financial crisis", he writes. The Treasury listed a number of steps to ensure that a potential bailout would not simply be for investors but for the safety and stability of the financial system. Doing so, critics argue, would undermine the central objective of Dodd Frank - preventing major bank failures that lead to financial crisis.

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