When Senate Democrats teamed up with Republicans last year to pass banking deregulation, they went all in, parroting conservative talking points about running to the rescue of Main Street. More than half of the Democrats who backed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) invoked “credit unions and small banks” when explaining their vote.
Less than nine months after it was signed into law, however, the legislation has already paved the way for the largest bank merger since the 2008 financial crisis — the proposed purchase of SunTrust by BB&T. Their integration would create the sixth-largest bank in the country.
Unsurprisingly, the vast majority of campaign donations last election cycle from those two banks to Senate Democrats went to supporters of “regulatory relief,” according to campaign finance disclosures aggregated by the Center for Responsive Politics.
Individuals and entities related to BB&T gave $10,331 to Senate Democrats; 93 percent of that went to supporters of S.2155. SunTrust affiliates gave $39,762 to Senate Democrats, 97.3 percent of which went to backers of the bill. The majority of the money came from the firms’ political action committees, not from employees.
Members of the Senate Democratic caucus who mentioned “small banks and credit unions” to boost S.2155 included Tim Kaine (D-Virginia), Mark Warner (D-Virginia), Tom Carper (D-Delaware), Chris Coons (D-Delaware), Jon Tester (D-Montana), Gary Peters (D-Michigan), Debbie Stabenow (D-Michigan), Doug Jones (D-Alabama) and Angus King (I-Maine); and ex-Senators Joe Donnelly (D-Indiana) and Heidi Heitkamp (D-North Dakota). Together, they and other Democrats joined with Republicans to give the legislation filibuster-proof support in the Senate. Initial co-sponsors also included Senators Joe Manchin (D-West Virginia), Michael Bennet (D-Colorado) and ex-Senator Claire McCaskill (D-Missouri).
Notable among lawmakers still serving: Senator Manchin received $5,000 tied to SunTrust; Senator Tester got $2,005. Senators Kaine and Warner each received $1,800 and $1,000 respectively. Meanwhile, Senator Jones received $6,755 from BB&T-related entities and individuals; Sentor Manchin received $1,100. Senators Carper and Kaine were each given $1,000 and $555 respectively.
According to lobbying disclosure forms, S.2155 was hugely important to both SunTrust and BB&T. Filings mention the bill as the only piece of legislation that crossed the desk of BB&T’s legislative affairs team in 2018. SunTrust lobbyists mentioned S.2155 in half of their disclosures from last year.
As its boosters claimed, the legislation did change certain rules governing smaller firms, whether or not one considers that a positive attribute of banking legislation. Some relief contained in S.2155, for example, involved exemptions for smaller banks from rules against speculation with federally insured deposits. Other provisions gave smaller banks an out from requirements forcing them to report data collected to combat racial discrimination in mortgage lending.
But S.2155 also relaxed rules on some of the largest depository institutions in the country — by tweaking Dodd-Frank reforms passed in 2010 to head off future meltdowns. One section forces the Federal Reserve to customize rules for banks with more than $100 billion in assets, rather than merely giving the central bank the option to tailor the rules, as had been previously allowed. The law also loosened a set of enhanced regulations on banks with assets between $50 billion and $250 billion — some of the largest institutions in the country.
As noted by The Intercept, this gave both SunTrust and BB&T extra resources and wiggle room to focus on hashing out merger plans. Forbes said the changes would save impacted banks “millions in regulatory compliance costs.” BB&T and SunTrust respectively have about $220 billion and $210 billion in assets.
While S.2155 was making its way through Congress, supporters said that the bill didn’t strip authority from regulators, claiming it merely provided the federal government with more discretion to use its power. Critics like Senators Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Massachusetts) noted that the Trump administration has shown little interest in overseeing the financial sector, and that the statutory changes will invite more neglect, particularly at the Fed, which oversees merger proposals alongside the Justice Department Antitrust Division.
In response to the BB&T-SunTrust merger proposal, Senator Warren released Fed data and analysis showing that the central bank increasingly waves through merger approvals. Between 2006 and 2017, the Fed approved 86.8 percent of all proposed bank acquisitions. By the tail end of that time frame, the approval rate rose to more than 89 percent, reaching above 94 percent after Trump took office. The most recent data show the Fed greenlighting “94.4 percent of mergers in the first half of 2018,” Warren noted.
When Warren brought up the issue during a congressional hearing on February 26, Fed Chair Jerome Powell replied by pointing out that the approval rate doesn’t account for withdrawn applications. But the senator had criticized withdrawals too, noting they suggest that there are inappropriate interactions between the Fed, a neutral government arbiter, and private-sector actors with business before it.
“Is this one just going to be another rubber stamp?” she asked Powell, of the BB&T-SunTrust merger. “You’ve already made the decision behind closed doors before the public gets a chance to weigh in?”
Powell denied the charge, saying the Fed will “conduct a very fair, open and transparent process.” He said the central bank has not even received the merger application yet. Warren replied the Fed would likely create “yet another too-big-to-fail bank” after it did receive the paperwork.
When BB&T and SunTrust announced their proposed merger last month, the two firms said it would enable them to invest in technology and collectively save $1.6 billion through “net cost synergies.” One critic described this claim as PR-fluff for “layoffs.” Bartlett Naylor, a financial expert at consumer watchdog Public Citizen, also predicted that the merger would bring more market concentration at a time when half of Americans’ checking accounts are already controlled by four banks (Wells Fargo, Bank of America, JPMorgan Chase and Citigroup).
“If the business case for this merger is premised on expanding market share to raise fees and rates — that harms consumers,” Naylor said. He added that policymakers should take the opportunity “to examine when banks become too big, as this won’t be the last proposed major deal.”