Taking It to the Banks, Cali Housing Crisis, and Don’t Feed the Trolls
Here’s What You Need To Know
If you’ve checked your Facebook news feed or partisan news sites over the past week, you may be thinking that the sky is falling and that the Senate is singlehandedly tanking the American financial system, hurting American families, and letting big bankers run wild. So, will this Senate legislation herald in the next financial crisis? Maybe not. The legislation, which passed the Senate 67-31 on a bipartisan basis, was crafted by Sen. Mike Crapo (R-ID) to address shortcomings of the Dodd-Frank financial regulations passed by Democrats in 2010. Here are those facts of what this legislation does, and what it means for the financial sector:
- Challenges In The Wake Of Dodd-Frank: After the global financial crisis in 2008, a unified Democratic government passed the so-called “Dodd-Frank” law for Wall Street reform in July 2010. The abundance of new rules, regulations, and government powers and agencies in the unwieldy, 848-page law tried to put an end to banks that were “too-big-to-fail,” restore faith in the banking system, and increase economic growth. However, it has done precisely the opposite of its initial goals, instead contributing to a decrease in smaller banks and the rate of new businesses created. Dodd-Frank was passed to increase regulation on the supposedly “unregulated” financial sector in order to “promote financial stability” and prevent another financial crisis. But the overly broad brush painted by Dodd-Frank, and the subsequent vast expansion of federal bureaucrats’ oversight of the economy, have led to a desire to pass reforms to address its shortcomings.
- What The Senate Bill Does: The Dodd-Frank bill was a blunt instrument passed in the wake of a crisis, with federal regulators treating both small and community banks the same as big banks like Bank of America, Chase, Wells Fargo, and others. The focus of the Senate bill is to make regulatory changes that mainly aid these smaller banks, who have been seeing their numbers dwindle, resulting in less money available to lend to small businesses across the country because while big banks may be able to absorb the costs of complying with complex federal banking regulations, small banks cannot. As Rob Nichols, head of the American Bankers Association, noted, “Dodd-Frank isn’t scripture. It can be improved,” and the Senate bill was popular enough to garner the support of 12 Democratic co-sponsors for a filibuster-proof majority in the Senate.
- The Political Peril Ahead For Banks: Contrary to the bipartisan nature of the legislation, particularly in support of smaller community banks across the country, a major rift on the Democratic side pits moderates against liberals and risks further politicizing banks at a time when they are increasingly being dragged into the political fray. Delve CEO Jeff Berkowitz wrote about the implications of today’s politicized environment on banks in a recent American Banker piece, and should it become politically-unpalatable to support bipartisan provisions that aid financial institutions on which many Americans depend for jobs and opportunity, further reforms to improve the regulatory environment will face an uphill battle.
Despite passionate opposition from the liberal side of the Democratic Party, the bipartisan coalition supporting the bill ensures that despite the brewing rebellion on the left, it will have momentum to be conferenced with the broader bill passed by House Republicans last year, and from there, may have a good chance to be signed by the President into law. The exposed Democratic rift heading into the 2018 elections highlights the different choices the Party faces in its messaging. With an increasingly liberal base, the Party’s path for success in elections where its moderate Senators are running is increasingly in conflict with its activist base.
News You Can Use
CALI’S COMPOUNDING HOUSING CRISIS
Subscribe to Receive Insights
"*" indicates required fields
The nation’s most-populous state is facing the nation’s most serious housing crisis, thanks in part to a “perfect storm” of “unique geography, state politics, and activist culture combined with a poorly distributed economic boom.” But don’t worry: state politicians are ready to help, armed with a slew of housing-related bills and new regulations.
Ironically, these bills may make things worse given that the “policies, priorities, and principles” of those same politicians contributed to the crisis in the first place. If policymakers want to actually reduce the factors that contribute to sky-high housing costs, and the fact that California has one-quarter of the nation’s entire homeless population, they would be better off embracing pro-market policies that encourage new housing construction rather than those that make it more difficult to build.
BUSTING OIL’S BOOM CYCLE
Related Posts:
Writing in the Harvard Business Review, partners at Oliver Wyman’s oil and gas and energy practices made the case that oil’s boom-and-bust cycle may be a thing of the past. The reasons for this shift include expanding domestic oil production in the U.S. due to fracking, increased investment in new services like pipelines, refineries, and other infrastructure close to their customers, diversification of oil suppliers and sources, and new efficiencies that allow producers to “respond nimbly and competitively to market shifts.”
One such efficiency that shows promise in the future energy landscape is carbon capture technology, which captures CO2 from power plants and then uses it to extract oil – turning carbon emission “into a financial commodity with an environmental co-benefit.” New innovations like carbon capture can help minimize the boom-and-bust cycle of the past and make this crucial sector more environmentally-friendly, although opposition from environmental groups and others to tax credits that would encourage carbon capture technology over wind and solar power may hinder its adoption.
DON’T FEED THE TROLLS
In The New York Times, Reason magazine’s Katherine Mangu-Ward argues, “The problem [with today’s political discourse] isn’t just filter bubbles, echo chambers or alternative facts. It’s tone: When the loudest voices on the left talk about people on the right … it is with an air of barely concealed smugness. Right-wingers … increasingly respond … [by] doubl[ing] down on whatever politically incorrect sentiment brought on the disdain in the first place. These two terrible tendencies now feed off each other” in a never-ending loop “that is nearly irresistible to those on the inside and confusingly abhorrent to those on the outside.”
American Enterprise Institute’s Arthur Brooks appears ready to step outside this loop himself, announcing in a Wall Street Journal column that he plans to step down as AEI’s president this year. “No one has ever been insulted into agreement,” Brooks writes in response to what he calls “the holy war of derision on both left and right” in which some Americans would rather shut down debate using “half-baked 280-character opinions and tiny hits of click-fueled dopamine,” than participate in serious political discourse. To move beyond this state of affairs, both Brooks and Mangu-Ward suggest ways to return to a common reality through debate focused on substance and facts, but doing so will require changes by both the players (political actors) and the observers (the media).
CAUGHT IN RED VAPE
Many small business owners can find themselves caught in red tape from federal regulations, and there may be some relief for them on the horizon due to pending lawsuits on behalf of the owners of e-cigarette “vape shops.” The suits focus on a 2016 regulation administered by an unelected career bureaucrat at the Food and Drug Administration (FDA) known as the “deeming rule,” which determined that vaping products would be subject to the same regulations as the tobacco industry under the Tobacco Control Act of 2009.
However, the Constitution requires Senate confirmation for rule-making power, meaning that should the outcome of the lawsuits favor vape shop owners, the decision may not only cut through the red tape impacting them, but reverberate throughout a variety of small businesses facing similar challenges across the country.
WALKING BACK MANDELA’S LEGACY?
A motion passed by South Africa’s National Assembly late last month allowing for the expropriation of land without compensation continues to garner attention around the world and enable sensitive, uncomfortable conversations in a country that emerged from the shadows of colonialism and apartheid just over two decades ago. At the heart of the issue is the 1913 Native Lands Act, which restricted land ownership for South Africa’s majority black population, and whose effects remain impactful today.
The Constitutional Review Committee is now reviewing the motion to expropriate land and will announce its findings by August 30th, leaving the interregnum filled with both extreme rhetoric that channels racist sentiments and serious questions that need to be addressed about fulfilling the expropriation of land without destabilizing either the food supply or the economy. Nelson Mandela, the father of modern South Africa, supported a policy of national reconciliation to address apartheid-era land policies, and while an existing clause in South Africa’s Constitution does allow for expropriation of land both with and without compensation, the change being sought to Mandela’s approach may inflame passions rather than help South Africa continue to heal.