Banks are ascendant in Washington, scoring major wins and enjoying the support of a friendly White House a decade after the financial crisis.

The banks are reeling in record profits, thanks to the growing economy and the booming stock market, the just-passed Republican tax-overhaul bill has slashed their tax rate and to top it all off, a bipartisan Senate coalition is fighting to loosen the post-crisis rules meant to curb risky behavior in the financial industry.

ADVERTISEMENT

Critics of the banking sector say the shift is the result of Wall Street seizing control of the government; they compare President Trump Donald John TrumpObama calls on Senate not to fill Ginsburg's vacancy until after election Planned Parenthood: 'The fate of our rights' depends on Ginsburg replacement Progressive group to spend M in ad campaign on Supreme Court vacancy MORE’s appointments to a Wall Street occupation of the federal government.

But banks and their lobbyists say the changing tides prove that the strict Dodd-Frank Act rules passed after the financial crisis went too far. They say the pendulum of regulation that swung hard to the left after the collapse needs to come back toward the center.

“We’ve had enough time to assess what works and what doesn’t work,” said James Ballentine, executive vice president of government affairs for the American Bankers Association (ABA), the country’s biggest lobbying group for banks.

“Reforms are needed and evaluation is needed for any industry, and we’ve gone through that process.”

While banks are seeing their influence grow in Washington, anger at the industry remains a potent political issue.

Trump often took aim at the industry during his campaign, asserting that Goldman Sachs controlled his opponent, Democratic nominee Hillary Clinton Hillary Diane Rodham ClintonWhat Senate Republicans have said about election-year Supreme Court vacancies Bipartisan praise pours in after Ginsburg's death Trump carries on with rally, unaware of Ginsburg's death MORE.

“I want you to imagine how much better our future can be if we declare independence from the elites who’ve led us to one financial and foreign policy disaster after another,” Trump said in a 2016 stump speech.

Yet once he won the White House, Trump tapped into Goldman and its alumni network to fill out his White House and Cabinet.

Trump chose former Goldman Sachs Chief Operating Officer Gary Cohn to lead the White House National Economic Council and former Goldman trader Steven Mnuchin Steven Terner MnuchinLawmakers fear voter backlash over failure to reach COVID-19 relief deal United Airlines, unions call for six-month extension of government aid House Democrats plan to unveil bill next week to avert shutdown MORE to serve as Treasury secretary.

Other Goldman alumni who have served in Trump’s administration include former deputy national security adviser Dina Powell and former chief strategist Stephen Bannon.

“There’s a huge contingent that has come down from Wall Street on I-95 and camped here in Washington, D.C.,” said a former senior congressional aide now on K Street.

Bank advocates say having financial veterans in the Trump administration is good for the country, as they can help show Washington where Dodd-Frank is working — and where it isn’t.

“In all posts, we want folks with expertise,” said Anthony Cimino, head of government affairs at the banking lobbying group Financial Services Roundtable.

“Having expert practitioners in place helps set a strong foundation and helps make sure as an industry we’re providing the right information. It’s a benefit to the American economy as a whole.”

Trump met with bankers and their lobbyists at the White House several times last year on how they’d like to change Dodd-Frank, and he ordered Treasury to review the law for potential changes. The department released four reports outlining their recommended fixes, which bankers praised as a moderate but helpful platform.

“Banks have changed. They’re safer, they’re better capitalized and they’re fundamentally different from where they were in 2008,” said a banking lobbyist. “Because of Dodd-Frank, the whole industry has changed.”

Trump and Congress struggled to make a major impact on Dodd-Frank until October, when lawmakers repealed the Consumer Financial Protection Bureau’s (CFPB) rule on forced arbitration. The rule, cheered by progressives, banned banks and financial services companies from blocking class action lawsuits with clauses mandating arbitration in customer contacts.

Trump signed the repeal of the CFPB rule in November, surrounded in the Oval Office by the chiefs of bank and finance lobbying firms that pushed to kill the arbitration measure.

Dodd-Frank took another blow in November when the CFPB’s first director, Richard Cordray Richard Adams CordrayConsumer bureau revokes payday lending restrictions Supreme Court ruling could unleash new legal challenges to consumer bureau Supreme Court rules consumer bureau director can be fired at will MORE, resigned to run for governor of Ohio. Cordray’s departure plunged the bureau into a legal battle over its leadership.

A federal judge sided with Mick Mulvaney Mick MulvaneyMick Mulvaney to start hedge fund Fauci says positive White House task force reports don't always match what he hears on the ground Bottom line MORE, the White House budget director whom Trump picked to be the bureau’s acting chief. That cleared the way for a massive CFPB shake-up that is likely to be in line with industry priorities.

Mulvaney has shifted the focus of the CFPB to deregulation and halted much of its regulatory and enforcement actions. He’s also hired several former aides to House Financial Services Committee Chairman Jeb Hensarling Thomas (Jeb) Jeb HensarlingLawmakers battle over future of Ex-Im Bank House passes Ex-Im Bank reboot bill opposed by White House, McConnell Has Congress lost the ability or the will to pass a unanimous bipartisan small business bill? MORE (R-Texas), the architect of efforts to reign in the CFPB, in political roles.

Even more changes to financial rules could come over the next year, both from Congress and the administration.

Senators are now preparing to pass significant changes to Dodd-Frank with bipartisan support. The bill would exempt small and mid-size banks from the most stringent parts of Dodd-Frank and scale back federal oversight of the financial system as a whole.

The bill doesn’t have the support from House conservatives to pass as written, but both the House Financial Services and Senate Banking committees are eager to reach a compromise.

Meanwhile, Trump-appointed financial regulators have filled or will soon fill key roles at the Federal Reserve, Office of the Comptroller of the Currency (OCC), and Federal Deposit Insurance Corporation, where they’re expected to loosen certain Dodd-Frank requirements.

Comptroller of the Currency Joseph Otting, a former bank CEO and colleague of Mnuchin, said the agency will start weighing changes to the “Volcker rule” on proprietary trading. Banks have long complained that the rule, named after former Fed Chairman Paul Volcker and meant to curb risky trades, isn’t clear and is too costly for small firms to handle.

Otting said the OCC would look to clear up which investments fall under the Volcker rule and whether smaller or less risky banks needed to follow the rule at all.

“Banks have capital to lend. They want to lend. They want to put it in the marketplace. But some of the prescriptive regulations have prevented that,” said the banking lobbyist.

The Fed also plans to release more information about the way they judge banks for risk and stability and reduce the frequency of yearly inspections for banks below a certain asset threshold.

“There is a window that’s closing, and I think that window is independent of the election outcome,” said the banking lobbyist. “This is kind of the best chance. People are focused on it. The committees are working on it. We’d like to see something happen now.”