Back in March I wrote that Democratic Senator Claire McCaskill was, in my humble opinion, possibly making a big mistake both policy-wise and PR-wise when she decided to throw her weight behind one of the GOP’s efforts to kill Dodd-Frank via the “thousand cuts” strategy. The bill was S. 2155, The Economic Growth, Regulatory Relief, and Consmer Protection Act, a.k.a. the Crapo bill, so-called after its main sponsor. I wrote then that, in opposition to the analysis of most industry observers who looked at S. 2155:
Many of the red-state Democrats who support the bill, like McCaskill, purport to buy into the argument that Dodd-Frank needs to be revised to help suffering community banks that the law has, they assert, disadvantaged. However, as Rivlin and Antilla report, “A 2017 FDIC report shows that deposits in community banks have grown in each of the past six years. …
In The Intercept, financial writer David Dayen notes, however, that anticipation of the loosened regulatory environment that the Crapo bill will create is already beginning to have the negative effects its critics warned about – effects that are hurting rather than helping the small community banks that had Reps. Ann Wagner (R-2) and Blaine Luetkemeyer (R-3) crying crocodile tears bemoaning their plight, while Democrat McCaskill plodded along the rhetorical trail these and other GOP financial industry minions blazed:
But banking industry analysts say the bill is already having the opposite effect, and its loosening of regulations on medium-sized banks is encouraging a rush of consolidation — all of which ends with an increasing number of community banks being swallowed up and closed down.
“We absolutely expect bank consolidation to accelerate,” Wells Fargo’s Mike Mayo told CNBC the day after the Senate passed the deregulation bill in March. The reason? Banks no longer face the prospect of stricter and more costly regulatory scrutiny as they grow. And regional banks in Virginia, Ohio, Mississippi, and Wisconsin have already taken note before the bill has even passed into law, announcing buyouts of smaller rivals.
A gloating report by FJ Capital Management concludes that, thanks to this newly deregulated environment, “over the next 10 to 15 years, the consolidation trend will reduce the number of banking institutions from 5700 to around 2,000.”
So the effects of this legislation, pitched as a necessary step to protect small, often rural community banks, will instead intensify what FJ Capital describes as a 30 year merger trend that has not only diminished but, thanks to the Crapo bill, will continue to diminish the number of community banks. And don’t kid yourself: it will also help to destroy the relative financial stability that Dodd-Frank has ensured in the wake of the collapse of the almost totally deregulated banking environment of 2008. Too big to fail, here we come.
Remember this next time our red-state Democratic Senator struts her bipartisan cred – she may get a polling bump out of it, but real people will have to make do with the mess of pottage she ends up serving us. But, of course, as usual, do I need to say that we should save our real disdain for the GOP lackeys who will tell us anything in their fight to take care of their rich cronies.