After a blistering few weeks of criticism from fellow Democrats, Jon Tester stuck with Republicans and a few members of his own party to soften banking rules that have been in place since the Great Recession.
On social media and cable news, Tester and other red-state Democrats were excoriated by some of the left’s more high-profile politicians for siding with Republicans to change the 2010 Dodd-Frank banking reforms, which were intended to prevent another financial crisis like the one that tanked the U.S. economy in 2008.
Tester told Lee Montana on Tuesday that critics of the bills were uninformed.
“Some will claim that we are, ‘Oh we’re just deregulating banks,’ ” Tester said. “We’re giving them regulatory relief. They’ll still be highly regulated. Their safety and soundness will be regulated.”
Co-sponsored by 13 Rs, 12 Ds & 1 Ind, our Economic Growth, Regulatory Relief & Consumer Protection Act just passed the Senate. I want to thank @MikeCrapo, @SenatorHeitkamp, @MarkWarner & @SenDonnelly for working with me to break through the gridlock & provide #Relief4MainStreet. pic.twitter.com/M9RmxXLTH8— Senator Jon Tester (@SenatorTester) March 14, 2018
Tester and other supporters of the bill have insisted that their focus was lifting the yoke of big bank regulations from community banks. Republicans and the 16 Democrats and one Independent voting for the bill wanted it to be easier for community banks to issue some loans, such as mortgages the banks held onto, rather than selling to a larger organization. In that case, the bank could issue a mortgage without getting an appraisal to determine the home’s worth.
“Small banks,” as described in the bipartisan Economic Growth and Regulatory Relief and Consumer Protection Act, are banks with assets of less than $10 billion. Tester is a member of the Senate Banking Committee and a cosponsor of the bill. For perspective, the combined assets of Montana’s chartered banks are about $30 billion.
Montana Credit Unions and the Credit Union National Association thanked Tester for supporting the bill.
Tester said the bill also relaxed reporting requirements to the point that fewer workers and money would be needed to comply with federal law. It would make it easier for a local banks to stay in business, he said.
The Big Sandy Democrat, up for re-election this year, has repeatedly pointed to a decline in the number of Montana bank charters, which he has said has dropped from 72 to 49 in recent years — that is, the number of documents on file authorizing a bank to do business.
There have not been 23 bank closures to go with the shrinking number of charters, although some national news organizations have taken Tester’s figures to indicate community banks lost. Montana’s Division of Banking and Financial Institutions confirmed for Lee Montana earlier in the banking bill process that banks in the state are performing well. Total assets for Montana’s community banks have risen from $18 billion at the Great Recession’s start to $30 billion at the end of 2017.
The number of bank charters in Montana has declined in Montana from 68 in 2008 to 46. That change is mostly due to Glacier Bank going from multiple charters for its branches to filing just one for its organization. Glacier became more efficient at filing charter paperwork. Banks didn't close.
Tester said banks doing well today might not be able to compete in the future. Regulatory costs have "gone through the roof," he said.
“Banks are doing well in Montana. What you need to look at here is 'what’s the long-term projection?' ” Tester said. “They’re still profitable, but I will tell you, it’s not unlike when we made the conversion to organic agriculture. I didn’t have to do it, but I looked around and envisioned out where we were going to be five or 10 years from now. I said to myself, ‘I’m not going to be able to compete if I don’t do this.’ And that’s exactly what community banks are doing.”
Opponents to the bill have not criticized the benefits to community banks, but rather the changes offered to big banks, including some bailed out by taxpayers 10 years ago. Their main objection was the definition of which banks are systematically important or “too big to fail,” to borrow a term used to describe banks that taxpayers were forced to bail out in 2008 to avoid further financial meltdown.
Since 2010, banks with assets of $50 billion or more have been considered systematically important under Dodd-Frank. The bank bill passed Wednesday raised that asset threshold to $250 billion. Banks in the $100 billion to $250 billion range are now required to do financial stress tests to determine their health. Under the Economic Growth and Regulatory Relief and Consumer Protection Act, those stress tests would be done only if regulators requested them. Critics dubbed the bill the #DoddFrankRollback.
#DoddFrankRollback weakens stress tests for the #BigBanks – banks that together took $239B in taxpayer bailouts last time around. We cannot afford to gamble another $240B of taxpayer $$$ on this bill & @CBO says this bill makes it more likely if passes. https://t.co/U1GaXe9Pcx— Senator Cortez Masto (@SenCortezMasto) March 7, 2018
“#DoddFrankRollback weakens stress tests for the #BigBanks — banks that together took $239B in taxpayer bailouts last time around,” tweeted Sen. Catherine Cortez Masto, a Nevada Democrat. “We cannot afford to gamble another $240B of taxpayer $$$ on this bill & @CBO says this bill makes it more likely if passes.”
Tester said Masto was correct about the bailout of banks in the $100 billion to $250 billion range no longer having to take mandatory stress tests, but he emphasized regulators could still impose the tests. There needs to be more tailoring of regulations for banks based in many cases not on their size but on what they’re investing in, he said. A bank with loans in the high-tech industry should be more scrutinized than a bank with farm loans, which are much more stable, he said.
Montana Democrats have been fairly silent on the banking bill, but national politicians they have strongly supported in the past opposed the banking bill to the end.
“This banking bill is a disaster. The Wall Street crash of 2008 showed the American people how fraudulent many of these large banks are,” said Sen. Bernie Sanders. “The last thing we should be doing is deregulating them.”
Sanders, an Independent from Vermont, is no stranger to Montana. He won Montana’s primary presidential election in 2016 and drew large crowds in 2017 stumping for the unsuccessful House candidacy of Democrat Rob Quist.
Tester said his support for the banking bill was not about getting re-elected. It had been pointed out in the national press that Democrats up for re-election in states that President Donald Trump won easily were the core of the bill’s small support among Democrats.
Montana’s senior senator also said political campaign donations from the financial industry hadn’t influenced his support for the bill. The commercial banking industry has contributed $295,050 to Tester’s re-election campaign, according to the Center for Responsive Politics, and $678,728 total.
“I’ve gotten a lot of phone calls, a lot of lobbying phone calls in the last week to 10 days. They’ve been from Wall Street banks that want some regulatory relief from this bill because they don’t get any,” Tester said. “And that’s a fact, Wall Street doesn’t get a damn thing out of this bill.”
Montana Republican Sen. Steve Daines also voted for the bill.