You are using an older browser version. Please use a supported version for the best MSN experience.

Why 17 Democrats voted with Republicans to ease bank rules

CNBC logo CNBC 3/15/2018 Jacob Pramuk

  • Seventeen Senate Democrats voted with Republicans to ease regulations on some banks.
  • Most of those Democrats face re-election this year, and seven of them are running in states Trump won.

a person wearing a suit and tie© Provided by CNBC

Seventeen Senate Democrats joined with every Republican in voting to roll back some bank rules Wednesday.

Many of those Democrats did so as they push for political survival.

The Senate voted 67 to 31 to ease regulations on all but the largest banks, in what would become the biggest rewrite of financial laws since the Dodd-Frank reform act passed after the global financial crisis. The legislation would raise the level at which banks are considered "systemically important" and exempts smaller banks from other rules aiming to curb risky behavior.

Critics in the minority party objected to a provision raising the threshold for an institution to be considered "too big to fail" to $250 billion in assets from $50 billion in assets, arguing it opens taxpayers up to more potential liability should a mid-sized institution fail. Under the bill, the entities below $250 billion in assets would no longer have to go through a "stress test" to prove they can survive a crisis. Some Democrats also criticized a provision related to mortgage data that they say will make it harder for the government to target discriminatory or predatory lenders.

It is unclear if the GOP-majority House will seek to pass the legislation or a more drastic rollback of bank rules that Senate Democrats would be reluctant to support.

The bank legislation left Democrats balancing competing concerns as they battle for control of Congress in November. Some members of the party have long argued smaller banks and lenders in rural areas should face fewer restrictions. Several Senate Democrats like Heidi Heitkamp of North Dakota face re-election later this year in states President Donald Trump won in 2016, and have tried to create an appearance of supporting bipartisan or moderate policies.

On the other hand, progressive Senate Democrats like Elizabeth Warren of Massachusetts warned against passing the bill, arguing it would apply to too many banks and damage efforts to protect consumers after the financial crisis. Ahead of November's midterms, Democrats want to cast themselves as better defenders of workers and consumers than Republicans.

Voting on the bill largely reflects the midterm political realities. The Democrats running in safer seats this year tended to oppose the bill, while the lawmakers in races that election handicappers consider close were more likely to back the plan.

Ten of the 17 Democrats who voted for the plan will run for re-election this year. Seven of them — Sens. Heitkamp, Joe Donnelly of Indiana, Claire McCaskill of Missouri, Jon Tester of Montana, Joe Manchin of West Virginia, Debbie Stabenow of Michigan and Bill Nelson of Florida — will face tough races in states Trump carried.

"You can't blame [Senate Minority Leader Chuck] Schumer for not wanting to twist the arms of red-state Democrats against home-state banking interests," former Schumer aide and Hillary Clinton advisor Brian Fallon told the Associated Press. "But from the standpoint of the larger party messaging, it's a missed opportunity to not strike a bright-line contrast on behalf of consumers."

Both Sens. Sherrod Brown of Ohio and Robert P. Casey Jr. of Pennsylvania, who also face re-election in states Trump won this year, notably opposed the bank plan. Both lawmakers appear to have an easier path to a November win than Democrats in more heavily Republican states like North Dakota.

The bill exposed fault lines among Democrats ahead of the midterms. In recent tweets, Warren hit her Democratic colleagues who supported the plan, saying it "wouldn't be on the path to becoming law" without her party.

Heitkamp told the AP "I came here to represent North Dakota, and that's exactly what I'm doing." She argued the bill "will make a huge difference for rural America."

Not just the vulnerable Democrats up for re-election this year backed the proposal. Sen. Doug Jones, who won a special election in deep-red Alabama last year, supported the bill. He will face another election in 2020.

Both senators who represent safe blue Delaware, Chris Coons and Thomas R. Carper, backed the plan. The banking industry has a strong presence in the state.

Other Democratic senators not up for re-election but who represent swing states or want to be seen as moderate also voted for the bank proposal. Those lawmakers are Maggie Hassan and Jeanne Shaheen of New Hampshire, Gary Peters of Michigan, Mark Warner of Virginia, and Michael Bennet of Colorado.

Some of those lawmakers also participated in a bipartisan group seeking a solution to end a government shutdown earlier this year.

Heitkamp's justification for backing the bill suggests more Democrats in red areas may have to shrug off national Democrats in order to compete in red areas, as Conor Lamb did in a House special election in Pennsylvania this week.

"I think people in North Dakota don't care what Elizabeth Warren thinks," Heitkamp recently told The Atlantic.


More from CNBC

image beaconimage beaconimage beacon