On Wednesday, March 14 the U.S. Senate voted to repeal parts of the banking regulation commonly known as Dodd-Frank (named for the bill’s sponsors Chris Dodd and Barney Frank), promulgated in the wake of the 2007-2008 financial crisis.
The following exchange occurred during a press conference call, March 14, between Senator John Cornyn (R-TX) and John Waters, Publisher of The Big Bend Gazette, about the effects this new banking legislation may have on the federal deficit.
The bill, “S. 2155: The Economic Growth, Regulatory Relief and Consumer Protection Act,” will increase the federal deficit by $671 million over the next ten years, according to the Congressional Budget Office (CBO). The bill, also called the “Community Bank Legislation” by Cornyn and others, has bipartisan support. While the bill does reduce regulations on smaller banks — defined as those with assets under $10 billion — it also reduces the regulatory burden on 25 of the country’s largest 38 banks.
One benefit for smaller banks is that the bill also amends the Bank Holding Act of 1956, by which banks are prohibited from engaging in proprietary trading and doing business with hedge funds and private-equity funds. (Proprietary trading is when a bank (or other business) trades securities, speculating for its own account.)
WATERS: Senator, I’m looking at the CBO estimate that says this legislation will increase the federal deficit by $671 million over the next ten years. I have two questions: Why are you supporting this legislation that will increase the federal deficit? And: what happened to the Republican credo of reducing the deficit?
CORNYN: I certainly support finding offsets for that, but what frequently you find is that the Congressional Budget Office projection is simply just a guess and they are frequently wrong. We haven’t given up on deficits and debt, although they seem to have fallen out of favor as a bipartisan goal in Washington. But I worry a lot that we are not dealing with the things that are creating the problem and its not honestly bills like this.
But I take your point; we do need to reduce deficits and debt. The problem seems to be that the only time our Democratic friends seem to be interested in deficits and debt is when we want to cut taxes. Of course I believe the economy will grow in sufficiently fast to fill that hole and result in a deficit-neutral tax bill. But I take your point; it still is a problem. It’s not going away and we need to deal — but obviously we are not dealing with it today.
WATERS: To follow up, if the CBO estimates are incorrect, as you suggest, do you or your staff have an estimate on how much this legislation will increase the federal deficit?
CORNYN: Honestly, you have an advantage over me, because I haven’t read that CBO score. What this does is basically cuts back on regulation of community banks and credit unions. What they assume is the federal government will continue to deploy those people anyway and what I’m assuming is that when you cut back on a regulation, you cut back on the regulators. I think that is the basic assumption — which I fundamentally disagree with. But we will certainly take a look at it and see if we can give you some additional reaction.