This op-ed was originally published in USA TODAY on August 1, 2018.
Do you ever stop to think about how much our world has changed just in the past few years?
Today, some of the largest and most powerful companies in the world — Google, Facebook and Twitter, to name a few — build and rely on technology that didn’t even exist a decade or two ago, dramatically transforming our society along the way.
As someone who was in the tech business longer than I’ve been in the Senate, I’m a big believer in the power of technology to improve people’s lives. I was living out of my car when I founded my first cell phone company. I later founded Nextel, and in the years since I’ve had a front row seat to the ways the phones in our pockets have changed the world.
But anyone who’s ever told their kids to put their cell phones away at dinner knows technological advances sometimes come with unintended consequences — and social media is no exception.
We need to learn from our internet failures
Over the past year and a half, Sen. Richard Burr and I have led the Senate Intelligence Committee’s bipartisan investigation into Russia’s attack on the 2016 election, uncovering the unprecedented ways Russia abused social media to divide Americans against each other and undermine our democratic process.
In many ways our intelligence community was caught off guard by this new threat. But with each new story about fake news, bots, trolls or Facebook’s mishandling of 87 million Americans’ private data, it has become even clearer that these social media companies were caught flat-footed — unable or unwilling to predict, detect or stop the abuse of their platforms.
Americans are increasingly expressing concern over how their data is being used, and whether they maintain control over their digital identities. As some of these companies have grown to the point of dominance, we’ve reached the point where one company’s mistake can have society-wide consequences.
I believe a national conversation about these issues is long overdue. The companies, the federal government, and individuals all share in the responsibility to make sure these great American technologies continue to work for the good of our county and its citizens.
>That conversation has to start with companies taking responsibility for their platforms and the potential for their abuse. Common-sense rules of the road for social media — like labeling bots and preventing the use of false identities and fake accounts — is a great place to start.
We also need to recognize that our every like, retweet, and search query leaves a trail of data unique to each American on the internet. We have not yet had a national debate about who should own that data, and what responsibility the companies who profit from it have to their users. It’s time we ask ourselves if Americans have the right to exercise greater control over their own data, and whether that right can be signed away simply by clicking an “I agree” button at the bottom of a screen full of indecipherable legalese.
This week, I released a set of 20 proposals, which I believe are a good starting point for this overdue debate on the future of our nation’s technology policy. Should public interest researchers have access to closely-held company data so that they can help identify problems early? Should data be portable and systems interoperable, allowing users to take their accounts to a competitor without losing all their content? Should the platforms be held responsible in some way for removing provably false content?
Government must have some role in answering these important questions, but it must also make sure regulation doesn’t stifle innovation. Congress also needs to substantially improve its understanding of technology in order to make smart laws.
Past time to adapt our laws for the tech age
I have hope that we can strike the right balance. Last year, I introduced the Honest Ads Act with Sens. Amy Klobuchar, D-Minn., John McCain, R-Ariz., which creates some modest transparency rules for online political advertisements. Facebook and Twitter used our legislation as a road map to create their own ad transparency tools, and I hope Congress will pass this still-needed legislation.
But at the end of the day, the responsibility lies in the hands of every American to decide the roles and responsibilities of technology in our lives, our economy, and our democracy. We should all strive to be active digital citizens — skeptical of what we read on the internet, protective of our private data, and vigilant against cybercriminals, foreign adversaries, and other bad actors who would do us harm.
And we should begin, belatedly, to address the challenge of adapting our laws and regulations to new technology and business practices. The American people have risen to every technological challenge we’ve faced as a nation, and I have faith that the challenges of the digital age will be no exception.
Sen. Mark Warner, D-Va., is vice chairman of the Senate Select Committee on Intelligence. Follow him on Twitter: @MarkWarner
By Senator Mark R. Warner
Originally published in the Tidewater News
We all know the stock market is booming. The economic recovery that began at the end of President Obama’s term has continued to gain steam under President Trump. In cities like Washington, D.C., it is almost like the great recession never happened.
But when you get outside the beltway, to rural communities across Virginia, you get a different picture.
The truth is, rural America continues to feel the lingering symptoms of the financial crisis.
Many rural banks have closed or consolidated. That means farm loans and mortgages are harder to come by. That means it’s harder for entrepreneurs to open a business in their home town.
A big part of the problem is excessive regulations — intended for the largest banks — are making it too expensive, too time consuming for small banks and credit unions to serve consumers, farmers, and small businesses.
That’s why I introduced bipartisan legislation (S.2155) earlier this year, with Sen. Tim Kaine and a bipartisan group of senators, to cut red tape for small community banks and credit unions, create new consumer protections, and help jumpstart Virginia’s economy.
This week, the House of Representatives passed our bill. It now heads to President Trump’s desk for his signature.
While our bill passed both the House and the Senate this year with strong bipartisan majorities, the effort to reform our banking laws to protect main street America’s access to credit has been years in the making.
I was elected to the Senate in the midst of the 2008 financial crisis, at a time when our system needed major reform. As a member of the Banking Committee, I helped write key portions of the Dodd-Frank financial reform bill that cracked down on Wall Street’s excesses and reined in the big banks. I’m proud of my vote to pass Dodd-Frank, and I believe our system is safer as a result.
But Congress never gets major legislation 100 percent right the first time.
Eight years later, we know that parts of Dodd-Frank intended to prevent banks from becoming “too-big-to-fail” have actually made some community banks and credit unions “too-small-to-succeed.”
In Virginia, we only lost one community bank and four credit unions during the financial crisis. We’ve lost over a quarter of our community banks and over a third of our credit unions since the passage of Dodd-Frank.
Small community banks and credit unions don’t have big teams of lawyers and accountants to help them comply with government regulations like the big banks do. Some of the community banks I’ve heard from only have one or maybe two loan officers.
Despite their size, community banks and credit unions are at the heart of our economy. According to a 2015 Harvard study, community banks provide over three-quarters of all agricultural loans in our country and half of all private small business loans. They’re the ones who help entrepreneurs open or expand their businesses, help farmers buy new equipment, or help you buy that new car or new house.
The fact is Virginia’s community banks and credit unions didn’t cause the financial crisis, and they didn’t get big taxpayer bailouts either. They shouldn’t be saddled with regulations intended for the biggest banks.
When small community banks and credit unions are spending their time on government paperwork, they’re not issuing mortgages, they’re not making loans to small businesses, and they’re not helping grow our economy.
Our bill begins to fix this, by tailoring regulations so that small banks and credit unions are better able to compete.
What our bill does not do is reduce oversight on the big banks or any foreign financial institutions, but it does include the biggest expansion of consumer protections in quite some time. Here are just a few examples:
For the millions of Americans hit by data breaches like the Equifax hack, it guarantees free credit freezes and unfreezes and year-long fraud alerts.
For active duty service members, it provides free credit monitoring services.
For renters, it provides new protections against unfair evictions.
And for veterans, it prevents credit bureaus from harming their credit scores because of payments delayed by the VA.
While these consumer protections will make a big difference for many Americans, ultimately the changes in our bill are relatively modest. We leave the vast majority of Dodd-Frank in place — and that’s a good thing.
But for main street consumers who depend on their local bank or credit union, and for anyone who believes Congress should put aside partisan politics to get things done, the bill is a big win.
SEN. MARK WARNER, a Democrat, represents Virginia in the United States Senate. He serves on the Senate Banking, Finance, Budget and Rules committees, as well as the Senate Intelligence Committee, where he is vice chairman.
To understand the current congressional debate over banking regulations, we turn to some of our favorite political commentators, the Southern rock band the Drive-By Truckers.
They may not be talking heads on your favorite cable propaganda channel of choice, but they get to the heart of the matter with their song about American politics, “What It Means.” Specifically the lines:
We want our truths all fair and balanced
As long as our notions lie within it
That’s a pretty good all-purpose set of lines to explain that we want things simple and predictable — which makes it hard to have a conversation about anything complicated that might challenge political orthodoxy on either side.
Such as, say, banking regulations.
After the financial collapse of 2008, Congress responded in 2010 by passing The Dodd–Frank Wall Street Reform and Consumer Protection Act, named after its two sponsors, then-Sen. Chris Dodd, D-Connecticut, and then-Rep. Barney Frank, D-Massachusetts.
The law, which runs 2,300 pages, sets up 243 different rules to regulate the banking industry and guard against the problem of banks being “too big to fail.” Good news: We won’t be dealing with all of those 2,300 pages today. But we will be citing the Drive-By Truckers again.
Consumer groups thought the Dodd-Frank law was a much-need reform; banks not so much, and ever since they have pushed to have the act repealed or at least revised.
A bill to do just that — the revision part — is now moving through Congress. Last week, it cleared a procedural vote in the Senate and seems set for passage later this week. Then it moves on to the House of Representatives. The bill has prompted a lot of teeth-gnashing among some of those left of center, who wonder why so many Democrats are backing this bill.
“Why Are Democrats Helping Trump Dismantle Dodd-Frank?” asked an opinion piece in The New York Times.
The website Vox was more blunt: “The 17 Democrats selling out on bank regulation is worse than it looks.” To accompany the story, it ran a photo of one of those 17 Democrats — Virginia’s Tim Kaine. Both he and Virginia’s other U.S. senator — fellow Democrat Mark Warner — are among the co-sponsors.
To some, this is — or ought to be — a clear-cut liberal versus conservative, Democrat versus Republican, consumers versus big banks sort of issue.
So why isn’t it?
First of all, the bill runs 68 pages and we can’t begin to vouch for everything in it. Like many bills, there probably are things in here that aren’t so great. We’d be naïve to think otherwise. The bill would, for instance, reduce the number of banks subject to the toughest regulations. That’s why Sen. Elizabeth Warren, D-Massachusetts, tweeted out the names of the Democrats backing a revision and complained that thanks to them, “the Senate just voted to increase the chances your money will be used to bail out big banks again.” However, the main reason so many Democrats — including Kaine and Warner — have signed onto the revisions is their concern about small banks, what we often call “community banks.”
It’s a fine, fine thing to rail against the big banks. But it’s no accident that the 17 Democrats backing the bill all come from states with a lot of rural areas — which is where community banks tend to be. There are unintended consequences for these small banks under one-size-fits-all regulations that are aimed at making sure the big banks don’t collapse in a heap so that taxpayers have to them bail out.
“Virginia only lost one community bank during the financial crisis,” Warner says. “We’ve lost 21 since Dodd-Frank passed. Regulations should keep Wall Street in check, not run small community banks out of business.” Nationwide, about one-fourth of community banks have disappeared. “I think a primary reason for that is regulatory fatigue,” says Lyn Hayth, president and CEO of the Bank of Botetourt.
So why should we care about community banks? If they can’t keep up with all the regulations, maybe their disappearance is really a good thing?
Here’s why we should care: Rural areas have a unique interest in community banks for one simple reason. The big banks often don’t have much presence in rural communities. They’re simply too small to make a difference to the global bottom line. If we want to build a new economy in rural America, that means – well, lots of things. But surely one thing is to encourage small business, particularly those that might grow into bigger businesses. Those are often the entrepreneurs who turn to community banks. Their proposals may not fit into whatever lending formula a big bank might use. A community banker, though, might actually know the applicant, and have a better understanding of whether their business is likely to succeed or fail in that community’s market.
However, between 2008 and 2016, small business lending has declined 13 percent while lending to large firms has increased 49 percent, according to Sen. Jeanne Shaheen, D-New Hampshire. The demise of community banks probably has something to do with that. Sen. Jon Tester, D-Montana, has explained his support for the Dodd-Frank revisions this way: “This has everything to do with access to capital in rural America.”
The New York Times disputes that community banks are in trouble, pointing out that their profits in 2017 were up 9.4 percent over the year before. That may be so, but some of that profit has been achieved by small banks merging — which means that post-merger, they are less of a community bank than before. And the number of new community banks formed in Virginia is zero — not exactly a sign of economic growth in rural areas.
We hate to make this political, but any proposed piece of legislation is inherently political. Part of the problem here is a lot of Democrats simply don’t understand rural America, and this debate provides a good example. Warren doesn’t have many rural localities in Massachusetts to look out for; Warner and Kaine have vast swaths of Southwest and Southside Virginia. Those places may not count for many votes anymore (especially for Democrats) yet they’re there, nonetheless. And if we’re going to build a new economy there, we need community banks. Is this bill perfect? Likely not. But can the Democrats voting against it tell us how we keep those remaining community banks — plus grow new ones? Or, to paraphrase the Drive-By Truckers, is that a notion that doesn’t fit within their truth?
Communities across Virginia are strengthened when Main Street banks provide capital for building homes, businesses, and schools. These banks are catalysts for economic vitality and serve as community bedrocks by investing in financial education, community revitalization, and charitable organizations.
Our community bank has provided financial services to local consumers and small businesses for over a century. However, the growth in regulation from Washington hampers the ability of local banks to help local businesses expand and create jobs. Thousands of pages of rules create a bureaucratic maze, making community banks operate more like big impersonal megabanks. The pendulum has swung too far and it’s time to right size federal regulation.
The Senate will soon debate the Economic Growth, Regulatory Relief and Consumer Protection Act, S. 2155, a bipartisan bill that makes reasonable reforms to regulation. It strikes a commonsense balance between necessary oversight and banks’ flexibility to meet Virginians’ financial needs.
I was pleased that both of our U. S. senators were willing to work across the aisle and cosponsor S. 2155, recognizing the need to reverse the regulatory over-reach and let local community banks serve our communities the way we have for over 100 years.
The number of banks in Virginia has declined over the last decade, in many cases due to the weight and expense of regulations. Let’s lift the burden on our local banks and our communities.
Scott C. Harvard, chief executive officer, First Bank
WASHINGTON—Consumers are on track to get one thing from Congress in response to last year’s massive Equifax Inc. hack: free freezes of their data held by the credit-reporting companies.
The bipartisan agreement, set to be approved in the Senate by next week as part of a broader banking bill, would require credit-reporting companies to let consumers block access to their credit reports to potential lenders without paying a fee. Freezing access to credit data is a crucial measure consumers can take if they want to protect themselves from identity theft.
Credit-reporting firms are mixed about the measure, which would erode a source of revenue, while consumer advocates worry it doesn’t go far enough to give people more control over their data.
The provision would set a single national standard for credit freezes. Currently, 42 states allow credit-reporting firms to charge for the service unless an individual was a victim of identity theft. Eight states and the District of Columbia mandate waiver of the fees under all circumstances.
The U.S. has three main reporting companies—Equifax, Experian and TransUnion—that typically charge $10 or less each to freeze or reinstate credit-data access, depending on a patchwork of state laws. The measure bars fees for both.
Under the provision, credit-reporting firms would have to place the freeze within one to three days after receiving a consumer’s request. Consumers would also be able to unfreeze their credit within an hour, if the process is requested electronically, or three days if requested by mail.
Consumer groups are concerned the measure would override future efforts by states to implement stricter freeze requirements on credit-reporting firms—for instance, making credit freezes a default setting for credit reports, essentially requiring consumers to approve any credit inquiry from potential lenders.
“It’s stopping the states from doing anything better in the future, and that’s a problem,” said Mike Litt, a director at U.S. PIRG, a consumer-rights group.
Sen. Mark Warner (D., Va.), one of the chief sponsors of the broader Senate bill, said he regretted the legislation—the result of a compromise between the political parties—doesn’t do more to rein in credit-reporting companies.
“They have all of our personal information,” Mr. Warner said. “And there are not clear standards and clear penalties.”
The credit-reporting firms have accepted the change is coming. “This is likely to be Congress’s opportunity to address the credit-reporting industry,” said Francis Creighton, head of the Consumer Data Industry Association, a trade group that represents credit-reporting companies.
“We think it’s fair that we’re able to charge a fee on a freeze,” Mr. Creighton, said. But, “given that [policy makers] don’t agree with us, this bill is perfectly reasonable,” he added.
“We are not upset with the provision of the proposed law. We support a federal security freeze statute that simplifies the process for consumers,” Experian said.
The provision likely will result in credit-reporting firms pitching credit-monitoring and other subscription-based services, according to a person familiar with the matter. People who contact the firms to sign up for the freeze will likely be marketed services that have a monthly fee attached to them, the person said.
Credit-reporting firms don’t break out what share of their revenue comes from credit freezes, though an industry executive says it is much smaller than other services they sell consumers, such as credit monitoring and identity-theft protection. But removing freeze fees would eliminate funds some of the companies say they use to help cover the costs associated with the freezes, including maintaining call centers. In some cases, the companies incur losses from the service.
The provision’s impact likely extends to lenders who receive loan applications from consumers with frozen reports. In some cases, lenders that contact the firms for the applicant’s credit reports and receive a notice that the report is frozen will still pay for that service. The lenders in most cases wouldn’t move forward with the loan application without a credit report.
Some firms are letting consumers place limits on their credit reports at no cost. Equifax and TransUnion offer a free service that allows consumers to lock and unlock their credit reports, while Experian charges for it. Locks are similar to credit freezes in helping to block identity thieves from obtaining financing in another person’s name. While they offer more convenience, such as control of data via an app, locks also give consumers less legal protection, consumer advocates say.
The credit-freeze provision is one of several proposals circulating in Congress since last year’s disclosure of the massive Equifax hack, which compromised the personal information of 147.9 million people. Many of the proposals go further than this bipartisan deal, with provisions to impose stricter regulatory oversight on the credit bureaus, charge penalties in the event of further breaches, or establish credit freezes as the default option for consumers.
Equifax itself hasn’t been able to shake off condemnation from policy makers and is the subject of several government probes. It also has upset its competitors. Experian and TransUnion believe the freeze legislation wouldn’t have materialized without the Equifax breach, according to the person familiar with the matter.
Late Wednesday, Senate Banking Chairman Mike Crapo, an Idaho Republican, proposed some last-minute changes to his overhaul of the Dodd-Frank Act. He specified that foreign banks such as Deutsche Bank AG and Barclays Plc won’t benefit from a reprieve in his legislation that’s intended to help regional U.S. lenders.
Crapo’s revisions -- filed in an amendment -- also make clear that only custody banks, including State Street Corp. and Bank of New York Mellon Corp., will win relief from a key post-crisis capital requirement. Citigroup Inc. and other lenders had been pushing lawmakers to expand a provision in the original bill so they would also get a break.
And Crapo declined to make changes to the Volcker Rule that firms such as Goldman Sachs Group Inc. had been pressing for.
Another recipient of bad news is Equifax Inc., the credit company whose 2017 hack put millions of consumers at risk of identity theft. Crapo’s amendment would require it and competitors to provide free credit monitoring to some consumers after a breach.
But Equifax and its competitors could benefit from a separate section Crapo added to his bill. The provision affects Fair Isaac Corp., the creator the FICO credit score that is crucial to consumers getting a mortgage. Crapo’s revision would direct mortgage-finance giants Fannie Mae and Freddie Mac to use credit scores offered by other companies, instead of exclusively relying on FICO assessments. Equifax and other credit-reporting companies own VantageScore Solutions LLC, a potential rival to Fair Isaac.
The bill broadly marks the Senate’s biggest overhaul of Dodd-Frank since it became law eight years ago. Crapo’s legislation is largely aimed at giving small and regional banks a reprieve from regulations put in place after the 2008 financial crisis, including raising the threshold for banks subject to aggressive oversight because they’re considered “too-big-to-fail.” To be sure, it does include some goodies for Wall Street.
Read More: Is Too-Big-to-Fail Over? Markets Don’t Buy It, NY Fed Says
The legislation’s backers -- including at least a dozen Senate Democrats -- say smaller firms didn’t cause the meltdown and that burdensome rules are preventing them from making loans that would spur economic growth. But progressives, including Massachusetts Democrat Elizabeth Warren, have repeatedly framed the bill as an assault on consumers that will undermine crucial reforms.
The Senate is expected to vote on Crapo’s bill as soon as this week, with lawmakers beginning the process of considering amendments Thursday. While dozens of amendments have already been offered, Crapo’s proposed revisions are by far the most important. His legislation is a compromise, not rolling rules back as much as the finance industry would like and doing little to help Wall Street.
It remains to be seen whether Crapo’s efforts will win the backing of House Republicans, who must also approve the bill for it to reach President Donald Trump’s desk. Last year, the House passed much more sweeping legislation that would rip up much of Dodd-Frank. If some House GOP members demand a more aggressive rollback, Senate Democrats could walk away, causing the legislation to fail.
In a sign that there still could be issues that need to be ironed out, House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, said in a Wednesday interview that there are about four dozen bills that the House has already passed that he would like to see added to Crapo’s legislation.
The version Crapo released Wednesday puts to rest questions about whether the biggest foreign banks doing business in the U.S. -- such as Deutsche Bank, Barclays and HSBC Holdings Plc -- would piggyback on the major break mid-sized lenders are poised to get from post-crisis oversight.
It clarified that foreign banks with more than $100 billion in consolidated U.S. assets will still be subject to aggressive monitoring by the Federal Reserve, echoing what Fed officials including Vice Chairman Randal Quarles have said in recent public remarks.
The move follows criticism from some Democrats that Crapo’s legislation could free non-U.S. banks from stress testing and other burdens -- leaving them “mostly deregulated,” according to Senator Sherrod Brown of Ohio. One of the key requirements for the largest foreign banks was to set up “intermediate holding companies” in the U.S., and the latest version of the bill keeps such a requirement in place.
Industry groups have been lobbying right up to an expected Senate vote to persuade lawmakers to expand a provision in the initial Crapo bill on what’s known as the supplemental leverage ratio, which forces Wall Street banks to maintain billions of dollars of capital to protect against losses.
The amendment Crapo released Wednesday indicates the campaign failed, as he left the language on the leverage ratio unchanged. That means custody banks such as Bank of New York Mellon and State Street that safeguard assets for the customers remain the only firms getting relief.
Still, the Fed is separately working to relax the capital requirement in a way that would benefit more lenders. The Congressional Budget Office estimated in a report earlier this week that there’s a 50 percent chance that the Fed will relax the rule for Citigroup and JPMorgan Chase & Co. should Congress pass Crapo’s bill.
For years, big banks like Goldman Sachs have been trying to relax the Volcker Rule’s ban on proprietary trading. While most of their focus has been on regulators, one change they’ve sought from lawmakers is reducing the number of agencies with authority over the rule. That, in turn, could make it easier to soften its impact. Crapo has declined to provide such relief in his legislation.
The U.S. Senate is expected to approve a sweeping revamp of financial rules this week.
Of all the surprises that entails -- about a dozen Democrats signing on, Republicans leaving a lot of the much-maligned Dodd-Frank legislation intact -- the biggest is the lack of goodies for Wall Street.
Some big banks are lobbying right up to the vote in hopes of salvaging a victory because the legislation probably marks the last time lawmakers with full plates will take up financial regulations before November’s crucial midterm elections. After that, it’s anyone’s guess when the industry will get another chance at relief.
“Is there something more that is going to happen this Congress? You can make the case that it is hard to see,” said Ken Bentsen, chief executive officer of the Securities Industry and Financial Markets Association, a Wall Street lobbying group.
The bill has a good chance of becoming law. The U.S. House and President Donald Trump are eager to pass legislation reforming the 2010 Dodd-Frank Act, and White House staff have been making calls to lawmakers to build support.
Sponsored by Senate Banking Committee Chairman Mike Crapo of Idaho, the Republican’s bill seems intent on not helping the giant financial institutions that fueled populist anger in the lead-up to the 2008 crisis, and other firms that have continued to trigger criticism.
Megabanks like JPMorgan Chase & Co. and Bank of America Corp. could walk away almost empty-handed. And Equifax Inc. -- the credit company that left millions of consumers vulnerable to identify theft after being hacked last year -- might even be punished with tougher rules.
Regulators More Friendly
Wall Street has been more successful in getting changes it wants from regulators. With agencies like the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency overseen by industry-friendly officials, among the regulations expected to be relaxed are the Volcker Rule, which prohibits banks from trading with their own cash, and lending rules that put brakes on predatory loans.
A core component of Crapo’s bill is giving small banks relief from a key provision in Dodd-Frank that they’ve been fighting to change for years. It would raise to $250 billion from $50 billion the asset threshold for banks to be subject to stricter Federal Reserve oversight, freeing firms like American Express Co. and SunTrust Banks Inc. from higher compliance costs associated with being considered “systemically important financial institutions,” or SIFIs.
Among the bill’s biggest losers are large regional firms like Capital One Financial Corp. and PNC Financial Services Group Inc., whose SIFI designations would remain.
The legislation does allow big banks to include municipal bonds in required stockpiles of assets that could be sold to provide funding in a crisis. It’s a modification JPMorgan and Citigroup Inc., especially, have pushed for years.
Wall Street is still lobbying for changes to the bill, including making one regulator responsible for the Volcker Rule, instead of the five agencies that now have a role in its implementation. The tweak, which is being sought by big banks such as Goldman Sachs Group Inc., could make it easier to relax the rule in the future.
The big banks also lobbied for relief in some capital requirements, but lost out. Instead, custodial banks such as State Street Corp. and Bank of New York Mellon Corp. are likely to see relief. Giant asset managers have been pushing to prevent the government from ever classifying firms such as BlackRock Inc. and Fidelity Investments as SIFIs.
Another last-minute tweak under consideration could benefit private-equity titans including Apollo Global Management LLC by removing regulatory burdens for entities known as business development companies. Business development companies, many of which are controlled by private-equity firms, invest in small businesses.
Capitol Hill staffers and lobbyists said they are skeptical that any changes helping Wall Street will make it into the legislation under the wire.
The measure must still pass the House, where some Republicans are likely to agitate for stripping away more regulation.
In many ways, Crapo’s bill forever enshrines the framework for post-2008 rules despite years of Republicans’ promises to gut Dodd-Frank and Trump’s pledge to do a “big number” on it about 14 months ago.
“Dodd Frank is still left in much of its form,” says Jim Nussle, president of the lobbying group Credit Union National Association. “That doesn’t change.”
The support of some Senate Democrats has been key to advancing the bill. Particularly supportive are Heidi Heitkamp of North Dakota and Indiana’s Joe Donnelly, who are up for re-election in states that Trump won in 2016.
The bill has divided Democrats, magnifying the party’s divisions on financial issues. On one side are progressives like Senator Elizabeth Warren of Massachusetts, who have attacked fellow Democrats for supporting a measure that she says is a handout to Wall Street and puts consumers at risk. While the fighting isn’t expected to dim the bill’s chances of passing, it does create a wedge that could have implications in this year’s midterm elections as Democrats try to take back control of the House and Senate.
Crapo may consider a package of legislation later this year addressing the securities and trading industries, according to lobbyists and Capitol Hill staffers. That would give Wall Street another shot at lobbying Congress to make changes.
Banks provide capital for community development initiatives, work with nonprofits on financial literacy efforts and donate millions of dollars to charities. In fact, a recent survey of 43 Virginia banks showed that $13.7 million was donated to different charities in 2016 by just those banks. Additionally, $627,678 was provided by those banks to provide scholarships to students in 2016.
Since the passage of the Dodd-Frank Act in 2010 and the thousands of pages of ensuing regulations, community banks’ ability to contribute to their local communities has been hindered. Providing financial services that individuals and small businesses need to succeed has become harder and harder each year, as these new laws and regulations continue to make it more difficult for community banks like mine to do business. In turn, this affects our abilities to be able to give back to the communities it is our mission to serve. The one-size-fits-all regulation we have encountered has negative economic consequences and is burdensome, unsuitable and inefficient not only for banks but for our customers.
We appreciate the fact that Virginia Senators Mark Warner and Tim Kaine seem ready to work together in a bipartisan manner to address this issue, signing on as co-sponsors of S.2155, the Economic Growth, Regulatory Relief and Consumer Protection Act. This bill is a bipartisan piece of legislation that includes commonsense improvements in the nation’s financial rules, which will allow banks to better serve their communities and foster greater economic and job growth. It will make it easier for the banking industry to expand mortgage offerings for consumers and expand the availability of capital and other resources for increased lending.
We continue to ask Senators Mark Warner and Tim Kaine for their support of S.2155 by voting yes when the bill is soon considered on the Senate floor. This bill is an important first step in right-sizing the rules for America’s banks. This is an opportunity for legislators to put in place a more effective and efficient set of policies that will allow banks to do what they do best — serve their customers and help America’s economy grow.
J. Peter Clements
Chairman, president and CEO
Bank of Southside Virginia
To the editor:
Virginia’s Main Street banks play a vital role in ensuring a vibrant economy, providing the necessary capital for building homes, businesses and schools. As leaders in our communities, banks have invested in financial education, community revitalization and philanthropic programs.
The pendulum has swung too far, and it’s time to right-size regulation in a more tailored approach.
U.S. Senate Bill 2155 — the Economic Growth, Regulatory Relief and Consumer Protection Act — is a carefully crafted bipartisan bill that makes commonsense improvements to the nation’s financial rules. It allows Main Street banks to better serve their customers and communities by opening doors for more creditworthy borrowers and businesses. It strikes the right balance between ensuring fundamental standards while offering flexibility to meet the specific needs of Virginians.
I want to thank Virginia’s U.S. senators, Mark Warner and Tim Kaine, for cosponsoring S. 2155. These sensible regulatory changes will help banks like ours continue to serve our communities and make it easier to help our neighbors purchase a home or expand their business.
With frequent gridlock in Washington, this bipartisan legislation is a shining example of how our elected leaders can advance solutions by working together and across the aisle.
JEFFREY V. HALEY
President and Chief Executive Officer
American National Bank
By Rick Finley For The Virginian-Pilot
RURAL VIRGINIA is still struggling to recover from the Great Recession. Eighty-five of Virginia’s 133 counties and cities have shed jobs since 2007. Our state’s southern and western regions are facing particularly dim economic prospects. Nearly half of their residents rated the economy as “poor” or “not so good” in a recent Washington Post poll.
Well-intentioned but overly restrictive regulations on financial institutions deserve some of the blame. Federal officials put these measures in place after the financial crisis to protect Americans from Wall Street’s predatory behavior. But the rules have hobbled many of the credit unions and community banks that are so vital to small towns and medium-size cities across Virginia.
Thankfully, U.S. Sens. Tim Kaine and Mark Warner are working to advance a bill that seeks to ease this regulatory burden. It’s one of the most bipartisan pieces of legislation we’ve seen in a long time, and if it becomes law, it will help rejuvenate communities throughout Virginia that the economic recovery has left behind.
Big banks helped cause the 2008 financial crisis. For years, they pushed mortgage loans onto customers who were unlikely to be able to pay them back. The banks packaged these loans and sold them to investors. When people failed to keep up with their payments, a chain reaction of defaults followed — one that nearly broke the global financial system.
To prevent risky lending practices from ever again wrecking the economy, Congress passed the Dodd-Frank Act in 2010. Regulators subsequently wrote thousands of pages of rules fleshing out and clarifying the law’s provisions.
As leaders from both parties now acknowledge, Dodd-Frank’s central flaw is its indiscriminate treatment of all lenders — including the credit unions and community banks that had virtually nothing to do with the 2008 crisis. The burden of complying with these complicated rules has hamstrung Virginia’s smaller financial institutions and diminished their ability to help communities bounce back from the Great Recession.
Take the regulation that requires lenders to stringently evaluate a borrower’s ability to repay a mortgage. This mandate makes sense for large banks with a history of giving loans to borrowers with questionable prospects for repaying them.
But it makes little sense for credit unions, which are small, member-owned institutions. Credit union members put their own money at risk when they make loans. So they have a strong incentive to lend responsibly.
Further, since only members can borrow from credit unions, they tend to know far more about their borrowers than a larger bank does. This knowledge allows them to make sensible lending decisions without the need for onerous federal oversight.
Dodd-Frank’s regulations cost Virginia’s 140 credit unions $478 million a year — and another $144 million in lost revenue. Not only is that a direct cost borne by Virginia’s 2.6 million credit union member-owners, but it’s also money that can’t be lent out to small businesses looking to hire more workers or families hoping to purchase homes.
The bill championed by Kaine and Warner — SB 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act — would undo much of this damage.
For starters, it would exempt small financial institutions that don’t make many mortgages from rules requiring them to disclose all sorts of information on those mortgages. Collecting and reporting that data can be very expensive and time-consuming — and thus raise the cost of credit for consumers.
The act also would allow credit unions to classify loans made to small-scale landlords purchasing one- to four-unit properties as real estate loans, rather than business loans. That distinction matters because credit unions can only lend a certain percentage of their assets to businesses.
This change could free up an estimated $4 billion for credit unions to lend to small businesses across the country. It would also put credit unions on equal regulatory footing with banks — and thus increase competition, to the benefit of consumers.
Common-sense regulatory reform for credit unions and community banks would inject new life into communities all over Virginia. It’s time for the rest of the Senate to join Kaine and Warner and hold Wall Street accountable without hindering small financial institutions.
Rick Finley is CEO of WJC Federal Credit Union in Damascus.