Jon Tester just can’t seem to win on bank reform. While those who identify as the real progressives complain from the left that his vote to repeal some of the most onerous restrictions on community banks that were part of the Dodd-Frank was a sellout, conservatives in Montana are screaming that the reform doesn’t go far enough, that we should repeal all of those pesky restrictions put in place after American banks crashed the global economy a decade ago.
Tester is getting hit from the left by voices like Sherrod Brown and Elizabeth Warren, who while certainly progressive on many economic issues, are also positioning themselves to win elections in 2018. It’s tempting from the outside, especially if their positions coincide with our own, to assume that Brown and Warren are fighting the noble fight against the banks and for the workers, but it would be awfully naïve not to see that each of them has political reasons to make hay over reform of Dodd-Frank. And he’s being hit from the right, where Republicans, including the MT GOP and those who would replace Senator Tester, want to lift all the provisions of Dodd-Frank on all banks, including the very mega-institutions we had to bail out after the crash.
Unlike a lot of people online, I don’t pretend to be an expert on banking reform, but I do know a few things:
- The small to mid-size banks that Tester voted to exempt from some of the most stringent requirements of Dodd-Frank absolutely needed regulatory relief, whether you ask arch-conservatives, progressive analysts, or politicians on both sides of the aisle.
- The impact of Dodd-Frank on small banks was to encourage consolidation and buyouts, as Politico noted: “The wave of new regulations that have been imposed on community banks is an enormous driver of decisions to sell to a larger bank…. Banks try to cope as best they can, but for smaller banks with fewer assets across which to spread fixed compliance costs, Dodd-Frank has too often sounded a death knell. Through its many asset-size thresholds, Dodd-Frank attempts to keep community banks in a tight box, where natural growth leads to cascading increases in regulation.”
- Analysis from the Harvard Kennedy School shows that community banks have suffered under Dodd-Frank, with market share rapidly decreasing between 2006 and today.
- Community banks are four times more likely to operate in rural areas like Montana, where they provide credit for small businesses, homes, and other needs.
- The largest banks—those responsible for the crash—will be just as regulated after the passage of this bill than they were before.
- Senator Tester has led the fight for accountability from Wells Fargo, one of the megabanks that opponents claim he is working for.
Given all that, I’m inclined to reject the easy and likely untrue narrative that Senator Tester is selling out to large banks. Frankly, Tester may be wrong about the need for this repeal, but his vote is to protect the viability of smaller banks in Montana who simply could not compete with larger institutions more able to process and manage the requirements Dodd-Frank placed on them. If anything, Tester’s vote helps level the playing field between those larger banks and the smaller institutions that serve us. To argue that Tester’s vote is a giveaway to megabanks is to ignore both his record and the literal text of the bill.
But what do I know? You don’t have to take my word for it. You can ask Christopher Dodd and Barney Frank, the people who wrote the original bill:
While we did not agree with everything in the bill, its main purpose is to give relief to Main Street without taking the foot off the gas when it comes to regulating the big guys that caused the financial crisis. Key protections designed to prevent another financial crisis, like regulations on derivatives and risky mortgages, are still firmly in place. The bill helps credit unions and community banks that are the lifeblood of rural communities. Frankly, these banks haven’t been the problem and Jon knows that because he’s from a rural community.
Jon is always thinking about Manhattan, Montana before he’s thinking about Manhattan, New York. His tireless advocacy for rural America was critically important to passing this bill and increasing Montanans’ access to capital. Jon fought back any attempts to deregulate Wall Street banks and he worked relentlessly to ensure this bill provided relief to the folks that needed it–not the multinational banking institutions.
I’m inclined to believe Senator Dodd and Representative Frank, who certainly have an interest in protecting their landmark legislation, and who understand that Senator Tester voted to protect the smaller banks that are vital to Montana communities while maintaining strong regulation over the largest banks in our country.
Politically, it seems like Senator Tester can’t win on this one, but as Vox noted, Democrats who supported this bill managed to “keep well over 90% of Dodd-Frank in place,” avoided “new significant risk to the system,” and protected the viability of community banks and credit unions.
That all sounds pretty damn progressive—and pragmatic—to me. Just ask Barney Frank and Chris Dodd.