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Sen. Heitkamp: Critics overstating case against bill loosening banking regulations

A decade after the financial crisis spurred tough financial regulation, the Senate took a step toward rolling back some of those rules on Tuesday. Republicans were joined by more than a dozen Democrats in moving forward with a bill easing requirements on banks worth $50 to 250 billion in assets. Judy Woodruff talks to Sen. Heidi Heitkamp, D-N.D., about why she supports the bill and more.

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  • Judy Woodruff:

    A decade after the financial crisis spurred tough financial regulation, the U.S. Senate took a step toward rolling back some of those rules today.

    Republicans were joined by more than a dozen Democrats to move forward with a bill easing requirements on banks worth $50 billion to $250 billion in assets. Specifically, those institutions wouldn't have to pass an annual stress test, as it's called, to make sure they are strong enough to survive a financial panic or keep as much capital on hand.

    Critics, including most Democrats, worry that these moves could increase the chances of bank bailouts in the future.

    But Senator Heidi Heitkamp, a Democrat from North Dakota, supports it, and she joins me now.

    Senator Heitkamp, welcome to the NewsHour.

    And I want to get to the banking story in just a moment, but first I have to ask you about our lead tonight, and that is the surprise announcement from the White House that the president's chief economic adviser, Gary Cohn, is stepping down after what has clearly been a dispute with the president, who he works for, over imposing tariffs on imported steel and aluminum.

    What's your thought about that? How is that going to affect trade policy?

  • Sen. Heidi Heitkamp, D-N.D.:

    Well, I'm deeply concerned that we won't have that voice that is the voice of reason in the White House as it relates to economic understanding of the importance of trade.

    Less than 5 percent globally of people in the world live in this country. If we're not trading, we're going to fail. I think that one of the biggest concerns I have with the White House is their trade policy. Gary was a great advocate for common sense as it relates to trade, and I find it deeply disturbing that he will be leaving.

  • Judy Woodruff:

    What does it mean for your state or North Dakota if these tariffs take effect?

  • Sen. Heidi Heitkamp:

    Well, we don't know yet which countries are going to be involved, but obviously all of the concerns about renegotiating NAFTA has had huge ramifications in our relationships across both borders, both Mexico and Canada, which are our largest trading partners.

    We are deeply concerned about the renegotiation of NAFTA and retaliation in the event these tariffs go into effect.

  • Judy Woodruff:

    Well, let me ask you now about this banking legislation that moved forward in the Senate today.

    As we said, it would exempt something like two dozen banks, financial companies that are somewhere between $50 billion and $250 billion in assets. They wouldn't be subject to the same sort of federal oversight that they are now and other requirements.

    Why — as you know, the concern about this is that it means if we come to the next financial crisis in this country, these banks are going to be back where we were in 2008, needing a big bailout from the federal government.

  • Sen. Heidi Heitkamp:

    Well, I think that's completely overstating the case.

    Number one, I think at the top of the hour you said that they no longer are going to be subject to stress tests. That's not true. The Fed has complete ability to stress test and to put anyone back into that designation if it's appropriate.

    But remember this, because Countrywide has been used as an example. We have not changed the rules as it relates to qualifying mortgages. We have not changed the rules as it relates to whether the Fed can stress test these institutions.

    We still have liquidity standards. And so what we did is, we basically moved an assumption. And that assumption is that, if you're below $50 billion, you do not present systematic risk to the economy. We said let's take a look at 250 as the presumption, but anything below that, where there is systematic risk, could still be included and still be regulated accordingly.

  • Judy Woodruff:

    Well, there still would be — as you say, there would be some stress testing, but much less than what we're talking about now.

    The small banks, as we understand it, would no longer — there would no longer be some protections for homeowners, for example, to go to court to prevent wrongful disclosures. In other words, these banks are being given a break because they say there's just been too much paperwork.

  • Sen. Heidi Heitkamp:

    I think that's way overstating the case.

    Let me tell about North Dakota. North Dakota doesn't have those institutions making mortgages because the compliance costs are way too expensive for these small community banks.

    And, as a result, they're either doing loans that are recourse loans, using other collateral like your paycheck, as opposed to your mortgage, or they're basically transitioning those to large banks like Wells Fargo.

    And when you don't have relationship lending, you're losing a big part of that capitalization in rural communities. And so the protections are there. And, you know, I find it interesting, because people always want to say, oh, these banks are going to take advantage of all these consumers.

    These banks are run by your neighbors. They're owned by your neighbors. They have been doing business for years and generations in these communities. And I think they know better what the community needs than a federal regulator.

    And let's put this back in focus. The reason why you have the mortgage standards that you have is to prevent a collapse of the economy using mortgage as a collateral in derivatives. So if you take these small community banks, they were never part of the too big to fail.

    And what we have created from too big to fail is too small to succeed. And so I have total confidence that my community banks know better what my communities need than a federal regulator who is trying to impose big bank standards on our small community banks.

  • Judy Woodruff:

    How do you know, though, Senator Heitkamp, that — there are — clearly, some regulations need to be in place. How do you know that the right regulations are still going to be in place?

    For example, there is concern about whether banks, they won't have to report — some of them, a number of them won't have to report the diversity of people that they lend money to. In other words, there are some regulations in there now that people say that need to be continued, whether they are done in exactly the same way or not.

  • Sen. Heidi Heitkamp:

    Well, let's take the HMDA rules. And that's been a point of contention here.

    We are not eliminating the standard of making sure that we have fair lending rules. There were fair lending rules before Dodd-Frank. The HMDA rules, which have been covered by all banks, are 40 pages of regulation that doesn't actually add any value to making sure that there isn't discrimination.

    We're saying, look, we will eliminate that rule-making for the smaller institutions, but if you fail, if you're a bad actor, we're going to impose these regulations back on you.

    And the one thing that I think is critically important, when you over-regulate, eventually, you reach a tipping point where everything is at question. We are doing very modest and very limited changes to Dodd-Frank to respond to what we're hearing on main streets in small communities like mine.

    And we're proud of this bill. We think that the results of this bill have been completely overstated by people who have been advocating against this bill because they want to see fundamentally absolutely no change to Dodd-Frank, even if the regulation doesn't make sense.

  • Judy Woodruff:

    Senator Heidi Heitkamp of North Dakota, thank you very much.

  • Sen. Heidi Heitkamp:

    Thank you, Judy.

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