In a recent Birmingham News op-ed, Sen. Richard Shelby (R-AL) promoted the Financial Regulatory Improvement Act of 2015, his effort to roll back the 2010 landmark Dodd-Frank financial reform law. Sen. Shelby framed the legislation as largely benefiting smaller banks, not Wall Street. The legislation, he wrote, “provides much-needed regulatory relief for community banks and credit unions and takes steps to allow financial institutions to reduce systemic risk, among other measures.”
Critics, however, say that Sen. Shelby’s bill is actually an example of legislation that is described as aiding small banks, but really helps the biggest banks. In an op-ed in The Hill last month, Marcus Stanley, the policy director of Americans for Financial Reform, argued that Sen. Shelby’s legislation “would weaken protections against the kind of mortgage lending abuses that were at the heart of the financial crisis, undermine consumer protections, and reverse improvements in the regulation of some of the largest financial institutions in the country.”
Stanley also pointed out that, despite Sen. Shelby’s rhetoric, the lion’s share of the provisions in the bill “mostly or exclusively affect” America’s biggest banks and financial institutions:
But the most misleading claim made about the bill is that it is a ‘community bank’ bill. In fact, almost 90 percent of the bill is devoted to provisions that would mostly or exclusively affect some of the largest banks and financial institutions in the country. Only about 10 percent of the bill is devoted to provisions actually limited to community banks and credit unions. As so often happens, rhetoric about ‘community banks’ is being used to sell regulatory giveaways to big banks and other powerful financial interests.
According to Stanley, “[o]nly eight provisions and about 19 pages of text are devoted to provisions that exclusively affect” community banks or credit unions with less than $10 billion in assets, which make up 98% of banking institutions in the U.S. On the other hand, a large portion of the bill – 59 pages – deals with issues that only affect the nation’s largest banks.
Lobbying efforts around the bill also point to a focus on big banks. More than one hundred companies, trade groups and reform organizations reported lobbying on the legislation in the first three quarters of 2015. A CREW analysis of lobbying disclosure records that list the Shelby bill number, “S. 1484,” found that most of the organizations lobbying on Sen. Shelby’s bill were big banks, large financial services and insurance entities, or their trade groups. Only eight entities strictly representing community banks and credit unions reported lobbying on the bill. By contrast, 17 banks with more than $50 billion in assets, lobbied on the bill, including Bank of America, Goldman Sachs, and JP Morgan.
Though it is impossible to determine exactly how much money was spent to specifically lobby on the bill, there is no doubt that the large financial institutions and their representatives have more means at their disposal to shape legislation. The handful of groups representing community banks and credit unions, which includes the Independent Community Bankers of America, the Credit Union National Association, the National Association of Federal Credit Unions, and the Community Financial Services Association, have spent $8.75 million on lobbying expenditures so far in 2015. The 17 big banks who lobbied on the bill reported spending more than $11.6 million overall during the first three quarters of 2015. In addition, two trade groups, the Financial Services Roundtable and the Securities Industry and Financial Markets Association, that represent the financial services industry – hardly the picture of community banking – both of which lobbied on the bill, reported more than $12 million in lobbying expenditures in the first three quarters of 2015.
If Sen. Shelby’s deregulatory legislation didn’t focus on the interests of big banks, these banks probably would not have dominated the lobbying around it. There is bipartisan support for regulatory changes that help smaller financial institutions, but that support shouldn’t be used to justify gutting Dodd-Frank reforms for the benefit of Wall Street.