The Washington PostDemocracy Dies in Darkness

Opinion Why Democrats need to stand with working Americans vs. big banks

Sen. Mike Crapo (R-Idaho) last September.
Sen. Mike Crapo (R-Idaho) last September. (Andrew Harrer/Bloomberg)

For election watchers, perhaps the most significant development of the past week happened not in Washington but in Wisconsin, where Democratic candidate Patty Schachtner won a state Senate race in a district that President Trump carried by 17 points. The unexpected victory, which Wisconsin Gov. Scott Walker (R) called a "wake up call" for the GOP, marked the 34th legislative seat that Democrats have flipped this cycle and offered yet another signal that a wave election may be coming.

A year into the Trump era, the discontent that drove his support among the working class in places such as Wisconsin has not abated. Though Trump's base has not yet abandoned him, his approval rating has dropped across voter demographics. The environment is ripe for Democrats, powered by the massive resistance that manifested again last weekend at Women's March events nationwide, to reclaim control of Congress. Unfortunately, a group of Senate Democrats seem intent on squandering this moment by siding against working families on the issue that most clearly embodies how the U.S. economy is rigged against them. They are joining with Republicans to roll back regulations on big banks.

As the New York Times reports, 11 Democrats are co-sponsoring a bill introduced by Sen. Mike Crapo (R-Idaho) that would significantly weaken the Dodd-Frank reforms enacted in 2010. Trump has expressed that loosening the reins on Wall Street is one of his top legislative priorities for 2018, and Senate Majority Leader Mitch McConnell (R-Ky.) is expected to bring Crapo's bill to the floor within the next month.

While it doesn't go as far as the extreme legislation to dismantle Wall Street reform that House Republicans advanced last June, the Senate bill is terrible policy. Under current law, banks with more than $50 billion in assets are considered "systemically important financial institutions" and therefore are subject to extra scrutiny. The Senate bill would lift that threshold to $250 billion, relaxing oversight of 25 of the 38 largest banks in the country. According to Americans for Financial Reform, those banks are collectively responsible for $3.5 trillion in assets and received nearly $50 billion in bailout money during the financial crisis. The bill would also roll back mortgage-lending protections and weaken the so-called Volcker Rule that prohibits banks from making certain reckless bets — some of the same careless behavior that led to the last recession.

Not only is Crapo's bill reprehensible policy, but also its Democratic supporters — six of whom are running for reelection this year — are also committing political malpractice. Polls show that the vast majority of voters want more regulation of big banks, not less. By endorsing a deregulation scheme that nobody outside the financial industry is asking for, Democrats are lending credibility to the Trump administration's broader push to loosen restrictions on Wall Street, including the gutting of the Consumer Financial Protection Bureau.

This self-defeating strategy would be shocking if only it weren't so sadly consistent with the party's recent past. After all, Clinton-era deregulation of the financial industry helped create the conditions that led to the 2008 crisis. "The only thing that the Clinton administration got really wrong was the repeal of Glass-Steagall. But at the time nobody saw what that was going to do," former Clinton adviser Elaine Kamarck told The Post earlier this month. But progressives did see it. Just days after the repeal was enacted in November 1999, the editors of the Nation warned, "History will record this bill as a landmark in the march toward the consolidation of financial power in America."

Today, progressives are again trying to dissuade their colleagues from compromising the interests of working Americans at the behest of the banks. "This bill increases the risk of another taxpayer bailout, and I will continue to challenge supporters of this bill — from both parties — to explain why they stand on the side of big banks instead of working families," said Sen. Elizabeth Warren (D-Mass.). Sen. Sherrod Brown (D-Ohio) recently asked, "Hourly wages have stagnated for 40 years, and too many Americans are still feeling the impact of the 2008 financial crisis. Who needs help the most?"

Brown is posing the right question. But when it comes to protecting working Americans from recklessness on Wall Street, too many of his fellow Democrats are still giving the wrong answer.

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