It's been a good year for financial companies. U.S. Banks profited by a record breaking $56 billion during the first quarter of 2018, up 27.5 percent from the year prior, because of tax cuts and a growing economy. The Federal Deposit Insurance Corporation (FDIC) estimated that without President Donald Trump's tax cuts, banks would have grown by $49.4 billion.
In the midst of these record profits and 10 years after the financial crisis, Congress passed a bill Tuesday evening to roll back parts of the Dodd-Frank Act, which created rules and guidelines for banks designed to prevent another 2008 financial crisis. Ending the act was a campaign promise of Trump's, but ending the regulations had bipartisan support in both Congress and Senate.
The rollbacks increase the measure at which banks are considered "too big too fail" and subject to tougher restrictions and stress tests from having $50 billion in assets to $250 billion. Additionally, smaller banks with less than $10 billion in assets would not have to comply with the Volcker rule, which stops them from taking large risks with money insured by taxpayers.
Supporters of the bill argue that allowing banks to grow larger without governance will increase lending and boost the economy, and that small and medium-sized banks will be able to grow more quickly without being encumbered by expensive compliance costs. Between 25 and 40 of the largest banks across the United States will no longer need to comply with strict regulation by the Federal Reserve after it is passed.
"Community banks and credit unions have struggled to keep up with the ever-increasing regulatory compliance and examiner demands coming out of Washington," Mike Crapo, Chairman of the Senate Committee on Banking, Housing, and Urban Affairs wrote in an op-ed. "The bill recognizes that some of the compliance requirements on small banks are either unnecessary or do not reflect the difficulty that many community banks, especially in rural areas, face in complying with them."
But some Democrats argue that the bill is another handout to large banks, who are already making record-breaking profits because of corporate tax cuts.
"The Senate just voted to increase the chances your money will be used to bail out big banks again," Elizabeth Warren tweeted when the bill passed the Senate in March. "If this bill had been about nothing but community banks, I think it would sail through with very little opposition," she said on Fox News Sunday.
The nonpartisan Congressional Budget Office estimated that the bill would raise federal deficits by $671 million over between 2018 and 2027, due mostly to a lack of fee and fine collection and because of the increased risk of annual bank failures.
