Deregulating banks—or doing just about anything that suggests coziness with banks—has not exactly been a winning message in the wake of the 2008 financial crisis. But ten years later, a bipartisan bank deregulation bill that partly unravels Dodd-Frank is moving through the Senate with the support of every Republican and 17 Democrats.

What started off as an effort to relieve pressure on community banks and credit unions has morphed into a gift to the biggest banks in the country. Quite simply, if the bill passes, banks will get richer. The legislation raises the threshold that triggers increased oversight from the Federal Reserve from $50 billion in assets to $250 billion, freeing more than a dozen banks from stricter rules. It also exempts more banks from the Volcker Rule, which curbs their ability to make speculative bets with their own money, and reduces the amount of capital they need to keep on hand.



In exchange, a financial crisis will become more likely. The Congressional Budget Office reported that the probability of “systemically important” banks failing “is small under current law and would be slightly greater under the legislation.” The 17 Democrats who are supporting the bill have basically shrugged at this possibility, arguing that the bill is a boost for small banks, small businesses, and consumers.



Indeed, Dodd-Frank has caused headaches for some middle-class people who have struggled to secure a loan or a mortgage because of its strictures. But the deregulation bill goes well beyond technical fixes. Barney Frank, the since-retired Democrat who co-wrote Dodd-Frank, has said the threshold should be closer to $125 billion. (As many have noted, the systematically destructive Countrywide Financial had less than $250 billion in assets when it collapsed during the crisis.) As David Dayen has reported, mega-banks like Citigroup are eager to lift capital requirements so they can engage in more risk. There just aren’t many reasonable policy justifications for these generous provisions.



There aren’t a lot of political justifications either. In going along with a bill that fulfills a number of longstanding Republican priorities and very few Democratic ones, Democrats are displaying a profound incoherence heading into the midterm elections.

