By Ron Crumpton
Democratic Candidate for United States Senate
In a recent op-ed on Dodd-Frank by my opponent Senator Richard Shelby, he promotes the idea that intrusive regulations that were put in place in by a congress bent on politicizing the Wall Street crisis as means of placing arbitrary one size fits all regulations on small banks that had nothing to do with the crisis. He also suggests his newly proposed legislation would solve all the problems caused by the Dodd–Frank Wall Street Reform and Consumer Protection Act, but these claims are untrue.
In reality, Senator Shelby’s Financial Regulatory Improvement Act is nothing more than a wish-list for the Wall Street bankers that fund his campaign. The companies that would see relief from the Senator’s bill are largely responsible for funding Shelby’s $19 million campaign war chest, and this legislation is nothing more than the Senator offering a kick back to his Wall Street allies.
The passage of Dodd-Frank did not leave local banks having to sift through thousands of pages of regulations to determine if they can make a car loan or refinance your mortgage as the Senator would have you believe. It put in place a system of regulation and monitoring that would make it more difficult for these banks engage in the same risky policies that caused the banking crisis in the first place, a crisis that resulted in a recession that stunted economic growth and resulted in job losses for workers in Alabama.
He describes local and regional banks as faultless in the banking crisis and therefore the regulations that have been placed on them were unnecessary. In reality, these banks, especially the regional banks, played a large part in the mortgage crisis and the out of control lending and poor underwriting that was the precursor to the collapse of the large banks and the need for our government to spend billions bailing them out.
Shelby’s bill would suspend the disclosure of loan-level data required under the Home Mortgage Disclosure Act.
This is information used to determine that mortgages are issued in a fair and non-discriminatory manner. The Government Accountability Office (GAO) has said that a lack of data on the financial products being offered severely hindered government oversight leading up to the housing crisis, which was a catalyst to the larger banking crisis.
It would also provide lenders with exemptions from mortgage guidelines that were established to prevent lenders from charging excessive fees and provide protections from faulty underwriting and bogus appraisals, which led many homeowners to being upside down on their mortgage from the moment they signed the papers.
His legislation would lessen reporting requirements for a large number of banks.
Currently under Dodd Frank, banks that have assets over $50 billion are considered “systemically important” and those banks are affected by more regulations because of the impact their failure would have on the economy. Shelby’s bill would raise that amount tenfold to $500 billion. This would free some of the nation’s largest banks from reporting on the nature of the financial services they provide, which would open us up to the same dangers that caused the financial crisis in 2008.
The bill would prevent insurance companies and brokerage houses from being listed as “systemically important” and allow them to offer a remedial plan on how they will address regulators concerns, as opposed to putting them on the list until they actually address the concerns.
Shelby’s bill only requires a plan, not actual action.
The bill would exempt banks with $10 billion in assets or less from the Volcker rule, which prohibits banks from conducting certain investment activities with their own accounts, and limits their ownership of and relationship with hedge funds and private equity funds.
The Senator talks about being against too big to fail, but his proposal will only serve to grow the big banks, it does nothing to reduce their size or the danger they pose to our economy should they fall on hard times.
The nation’s largest banks continue to engage in the same risky behavior that caused the recession, they receive unstated government subsidies that provide an unfair advantage, and they have proven that they are willing to throw out the law and regard for the greater good in the greedy pursuit of the almighty dollar.
In addition to their risky investments, the big banks have a history of breaking the law whenever it suits their purpose, which is to pad their own pockets. Over the last several years, they have been found guilty of manipulating foreign exchange rates, dealing with countries that they are prevented from dealing with by law (countries sanctioned for national security reasons including Iran, Syria, and Sudan), laundering money for murderous drug cartels, and discriminating against black and Hispanic borrowers.
In other words, they are only interested in their bottom line, they are not worried about the economy, or the American people.
This is not an industry that needs less regulation, it is an industry that needs more regulation.
If Senator Shelby were serious about ending too big to fail, he would drop this ridiculous bill and support the New Glass-Steagall Act (NGSTA), which would force banks that accept federally insured deposits to rely on traditional lending and would prevent them from dealing in securities, dealing swaps or operating hedge funds and private equity enterprises. Glass-Steagall, passed during the Great Depression, resulted in relative stability for the banking sector until it was repealed in the 1990’s.
In truth, he is not interested in real reform, protecting our economy or the financial future of Alabamians. He is sponsoring a Christmas wish list for his Wall Street buddies and calling it reform.
If Senator Shelby calls his Financial Regulatory Improvement Act anything other than a hand out for the big banks, then he is being untruthful and the people of Alabama deserve better.