Dick Bove, a high-profile banking analyst, was feeling contrite. For years, Bove, a regular on CNBC, has been arguing for the rollback of regulations imposed after the 2008 financial collapse.
“But lately I’ve been trying to figure how regulation has hurt the banking industry,” Bove confessed in an interview last spring. “And I’m having a lot of trouble coming up with an answer.”
This week, the Senate considers the Economic Growth, Regulatory Relief, and Consumer Protection Act, a bill that represents the greatest threat to the Dodd-Frank financial reform law since its passage in 2010. The bill would relieve all but the country’s largest dozen banks of increased scrutiny and ease mortgage rules imposed after the financial crisis. It would undermine fair lending rules designed to counteract race discrimination and weaken the Volcker rule, which limits a bank’s ability to make speculative trades with federally insured deposits. The arguments that Bove has been making publicly for years are the same specious ones being offered by the bill’s co-sponsors, and the trade groups calling for a rollback of banking regulations: Banks are suffering and so, by extension, are consumers, businesses, and the economy at large.
“When you take a close look,” Bove says now, “it’s really hard to argue that regulation harmed the banking industry.” Bank earnings have gone up every year since 2010, according to data from the Federal Deposit Insurance Corporation, and soared more recently. “In 2014, and again in 2015 and 2016, bank earnings hit all-time records,” Bove said. “Loan volume, which was obviously lousy at the beginning of this period, picked up substantially in 2014, 2015, and 2016.”
Not that many inside the Beltway seem to care. To the extent pundits are talking about the bill, it’s to hail a rare show of bipartisanship. A dozen moderate Democrats are listed among the co-sponsors of what insiders refer to simply as the Crapo bill, after its main sponsor, Mike Crapo, R-Idaho, chair of the Senate Banking Committee.
“I don’t think that if you’re really thinking about the vast majority of Americans, you decide that your very first bipartisan bill is one that deregulates some of the biggest banks in the country,” said Dennis Kelleher, president of Better Markets, which pushes for tighter regulation of financial institutions. “But let’s take a step back and ask why there’s a bill at all. They’re saying, ‘We need ‘regulatory relief.’ How could you need regulatory relief if lending profits and every other metric you can look are at or approaching historic highs?”