It’s understandable that cynicism has become the default approach for average Americans navigating the political environment. Interpreting events as the product of a raw power contest rather than a clash between competing principles is not only simpler but often correct. Occasionally, though, a purely cynical understanding of how politicians conduct themselves can lead observers astray. Sneering pessimism alone would not have led anyone to conclude that bipartisanship would be breaking out in Washington in an election year. But, to a degree, it is.
In March, two-thirds of the U.S. Senate voted to repeal aspects of the Dodd-Frank Wall Street reform bill passed in the wake of the mortgage market’s collapse and the ensuing economic downturn. That bipartisan sentiment did not abate when the bill reached the House yesterday, where 258 members—hardly a party-line vote—approved the regulatory rollback measure. Predictably, progressive politicians allege that the vote was the culmination of a treacherous scheme hatched in backrooms between nefarious politicians and mustache-twirling special interests.
“Big banks have spent millions of dollars trying to roll back the rules we put in place after we bailed them out ten years ago,” Senator Elizabeth Warren wrote. “Today, they got what they paid for.” Rep. Keith Ellison called the vote indicative of America’s “full-on lurching towards plutocracy.” For Rep. Yvette Clarke, the rollback of Dodd-Frank regulations will facilitate “discrimination against African-Americans, Latinos, and other minority groups.” For Bernie Sanders, to whom everything looks like a nail, this was another indication that it was time to “break up the largest financial institutions.”
It is hard to square these hyperbolic reactions with the effects of this soon-to-be law. The bill reduces the number of large banks subject to onerous regulations imposed on them in 2010 and unburdens smaller banks with less than $250 billion in assets from complying with Dodd-Frank regulations. Progressive regulators have lamented the move as one designed only to improve the lots of America’s richest financiers, but this is a political message divorced from reality.
Critics of Dodd-Frank always noted that the risk to the foundations of the economy were not banks with relatively small assets but major institutions like JP Morgan Chase or Bank of America, which have well over $1 trillion in assets. It was the smaller community banks with $50 billion in assets and less that make up the vast majority of American financial institutions and once accounted for most small business loans. The balance has