Shelby 2.0 Update (Dec. 3)

Mike & Co. —

The holiday season ends December 16, apparently.  On that day, almost all now agree, the seven-year national zero-interest rate season will end.  It is as baked in as the sun in the morning — barring calamity in the November jobs report, of course.

All year long Senate Banking Chair Shelby has insisted his Dodd-Frank deregulation bill is just community bank relief and a few stocking stuffers.  Now that we are in the stretch run to Christmas, is anyone buying it?  More below.


If four moderate Senate Banking Democrats meet repeatedly to discuss which provisions in the Chair’s bill they can sign onto and pass but neither the Chair nor the Ranking Member is involved in the discussions, does the bill exist and if so, will it pass?

Answer:  yes and no.  In a sleight of hand move, veteran Banking Chair Shelby has steered his bill away from his Committee, which can only reach the floor from there if it is modified.   He’s also senior on Approps. and that’s where it’s hiding.  In July, Shelby succeeded in attaching his original bill to an appropriations proposal approved in a partisan committee vote.

Though the current discussions are happening as Congress gears up to pass legislation before December 11 that would fund the government and avert a shutdown, Democratic leaders have steadfastly opposed policy riders in spending measures, particularly if they walk back regulations in the 2010 Dodd-Frank regulatory law.

House and Senate Republicans first proposed enabling regulators including the FSOC to pick which regional banks would be subject to the so-called enhanced prudential standards, replacing a fixed $50 billion asset trigger in place today.  Senate Banking Democrats have pushed back on including FSOC in the process, and some appear more amenable to raising the threshold to a higher number, according to sources following the issue, who said $250 billion is a possibility.

“The best I can say right now is that all of that is in play,” Sen. Crapo said yesterday. He confirmed discussion of a tiering approach — giving regional banks below $500 billion an opportunity to escape the tougher rules.

Fed Chair Janet Yellen told a House panel last month she would only support a “very modest increase” in the $50 billion asset trigger.  Treasury Secretary Jack Lew has said “even $150 billion, $200 billion institutions are large” and that “we have to be careful not to get into a conversation where we start rolling back some of the core protections that have made our system safer and sounder.”

Sen. Tester was central in the group of Committee Democrats and occasional Republicans who kept talks going after a partisan vote on Shelby’s original proposal in May.  But said he was not pushing for changes to the way the FSOC designates nonbanks as “systemically important,” as proposed by Shelby in his bill.

Where do things stand today?

Tester:  “The deal is far from complete. At this point in time, I don’t know that it’s going to happen.”

Sen. Donnelly, another member of the group:  “I remain optimistic, but it is clear to me that this package is not ready for inclusion in the omnibus spending bill.”

Ranking Member Sherrod Brown:   Democrats are “not negotiating any of the stuff Shelby really wants.”

Shelby has tried to include his bill in an upcoming government funding agreement, but Brown knows the battle has moved forums.  Still, he says he is “confident” that Senate Appropriations ranking member Barbara Mikulski will “hold the line on Wall Street overreach.”

In fact, Brown implied he’d outfoxed the Chair, saying “big parts” of what he was advocating for in a package to help community banks in May was tucked in a transportation bill headed for the president’s desk in the coming days.

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