By Shaun Kern
Before Dodd-Frank, Congress had a strong track record of working across the aisle when it came to banking issues. This is because past lawmakers from both parties recognized that the banking system must run safely, efficiently, and prosperously to play its part in driving U.S. economic growth. This bipartisan approach typically made better public policy. However, this approach also helped ensure that the changes Congress made to our banking laws were more durable, since both parties had meaningful input into the legislative process. The regulatory reform bill just signed into law by President Trump marks an important return to that tradition of bipartisanship, and hopefully a roadmap for the future.
Looking back in time reveals the history of bipartisan banking policy. The Bank Holding Company Act of 1956 is just one example. A major bill that still shapes the contours of today’s banking industry, the BHCA passed the Senate 58-18 and the House 371-24. The BHCA’s passage in the Senate was unquestionably bipartisan, with 35 Democrats, 22 Republicans, and one independent coming together for passage. When Congress amended the BHCA in 1970 to include one-bank holding companies, enactment was an overwhelmingly bipartisan exercise, with a House vote of 366-4 and Senate vote of 77-1. In 1987, Congress amended the BHCA to expand its coverage to “nonbank banks” through the Competitive Equality Banking Act. It passed the House 382-12 and the Senate 96-2. The BHCA and these amendments may not be perfect laws, but they are perfect examples of how it is possible to both enact and revise major banking laws with bipartisan consensus.
Bipartisanship was also alive and well when Congress enacted two major laws responding to the savings and loan crisis of the 1980s, a high profile and controversial issue at the time. The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 was enacted by a 91-8 margin in the Senate and a 221-199 margin in the House. The narrower vote in the House nevertheless had strong party crossover among both supporters and opponents, no sharp political divide. The Federal Deposit Insurance Corporation Improvement Act of 1991, passed the House 344-84 and the Senate 68-15. Much like the BHCA, FDICIA passed the Senate with an unquestionably bipartisan final vote. The Senate passed FDICIA after 36 Senate Democrats combined with 32 Senate Republicans for enactment. FDICIA’s aims were bipartisan, and the outcome showed that different political parties can join forces to modernize regulation, minimize the cost of bank failures and increase accountability for banks and regulators alike.
Several years later, Congress took a major step in passing the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which was a sensible and broadly supported modernization effort to enable banks to conduct business across state lines. Before Riegle-Neal, many states had already permitted some form of interstate banking. However, after Riegle-Neal took effect, all of America’s banks were subject to the same consistent standards for interstate expansion. Riegle-Neal passed with overwhelmingly bipartisan support, garnering a 94-4 vote in the Senate and passage by voice vote in the House.
When the Gramm-Leach Bliley Act was enacted, it too received overwhelming support by both parties in both chambers of Congress. The Senate’s vote was 90-8 with the support of 52 Republicans and 38 Democrats. The House vote was 362-57, with 207 Republicans and 155 Democrats voting for passage.
However, the Dodd-Frank Wall Street Reform and Consumer Act of 2010 was a glaring and unfortunate blemish in Congress’ long-standing bipartisan track record in crafting banking legislation. The financial crisis brought to light real problems that would have been best addressed through bipartisan consensus. Regrettably, Dodd-Frank passed with 234 Democrats and only 3 Republicans in the House. Dodd-Frank barely reached 60 votes in the Senate with the support of 57 Democrats and only 3 Republicans. Dodd-Frank received a startling 98% of its votes in support of passage from one political party. Simply put, Dodd-Frank was not bipartisan.
Fortunately, Congress just regained a bit of its old form in enacting S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act. Banking Committee Chairman Mike Crapo (R-Idaho), and his colleagues from across the aisle came together and forged a bipartisan compromise that ultimately garnered a 67-31 final vote in the Senate, which came from 50 Republicans, 16 Democrats, and one Independent. With support and leadership from House Financial Services Committee Chairman Jeb Hensarling (R-Texas), the House passed S. 2155 by a margin of 258-159, with 225 House Republicans joining forces with 33 House Democrats. It’s notable that many of the specific provisions in the bill had previously cleared the House with even stronger Democrat support, and some were originally co-sponsored by Democrats.
Members from both parties in Congress joined the president in putting politics aside and passing a targeted set of common sense regulatory reforms that were long overdue. This cooperative approach has been encouraging, particularly since Washington can’t agree on much. While there is certainly more to do to tailor regulations based on banks’ risk profiles and business models, the important regulatory reforms found in S. 2155 pave the way for future reforms by showing that supporting the economic growth and opportunity that America’s banks provide is something that both parties can get behind. Let’s hope that bipartisan banking policy is back to stay.
