New Banking Deregulation Could Lead to More Lending Discrimination

Today we bring you a conversation with Alexis Goldstein, a senior policy analyst at Americans for Financial Reform, which is a coalition of about 200 organizations that fight for a safer and a fair economy. Goldstein discusses recent bipartisan bank deregulations, what defanging the Volcker Rule would mean, and why the US hasn’t moved on from the 2008 global financial crisis.

Sarah Jaffe: I wanted to start off by having you give us an overall picture of what the Trump administration, with the help of Congress and various other allies, has done in terms of bank deregulation.

Alexis Goldstein: It is basically déjà vu all over again, is the short answer. It is like it is the 1990s and it is full speed ahead on ripping up all of the rules that we put in place after the last financial crisis.

There are a few different things that are going on. One thing that is happening is in the consumer space. One of the best things that came out of the last crisis was the creation of this consumer bureau that was the brainchild of Elizabeth Warren, the Consumer Financial Protection Bureau. It was one of the few places that was actually looking out for the little guy….

The other thing that they did is they sued companies and tried to get back money that financial companies had stolen from people. They got back billions of dollars to millions of Americans. Trump installed this guy, Mick Mulvaney, who is this Tea Party guy who was already at the Office of Management and Budget, so this is his other job. He is basically like Scott Pruitt at the EPA, a long-time foe of the bureau, running the bureau and dismantling it from within.

When you complain, there is this database you can look at. So, if you have a company that is really giving you the run-around, you can look into the database and see if other people have had the same problem. Mulvaney wants to take the complaints offline so you can’t read them anymore. There were a bunch of lawsuits that the Bureau was pursuing against payday lenders that were totally scamming people and charging them like 300 percent interest. He dropped some of those lawsuits. He totally eliminated the office [that looked out] for students [at the Bureau of] Consumer Protection, which was one of the best — in my opinion — offices looking out for student loan borrowers. That is the consumer space.

Then, if you look into the more bank-y, more systemic risk, more crisis kind of stuff, we are also seeing rollbacks there. We are seeing proposals to undo Dodd-Frank. Then, the third piece is partially Trump, partially GOP, but also, there are Democrats to blame. There were these really big pieces of legislation … recently signed into law that kind of make a future bailout more likely. It is sort of like Congress is doing bad things, and then Trump is doing bad things in both the consumer space and the financial systemic risk space. It is all the bad things.

The thing that tipped me off to have this particular conversation this week was that the Volcker Rule … is one of the things that is up on the chopping block. Can you tell our listeners what the Volcker Rule is, first of all, and then, what they are trying to do to it now?

The Volcker Rule was part of Dodd-Frank, which is the 2010 law put together after the financial crisis. The Volcker Rule basically said, “If you are a bank that enjoys taxpayer backing, you cannot do risky, reckless gambling….” And, of course, no bank really exists without government support. Banks are basically this intermediary between the government and us, that they basically give money to through this thing called the “discount window.” It is a pretty good racket. It is nice work if you can get it.

The Volcker Rule not only just said, “You can’t do this risky gambling,” it also defined what that meant. Not only could you not do what is called proprietary trading and just gamble on random securities, you also couldn’t take a huge investment in a hedge fund. You couldn’t take a huge investment in … private equity fund[s], which are really risky and have a tendency to blow up. The rule isn’t perfect. I, and a bunch of other people in this group called Occupy the SEC, wrote a really long wonky comment letter to try to make it better. It got marginally better in some ways and marginally worse in other ways. But it was a decent rule.

Now, they are basically proposing a total redo. I would say the biggest thing they are trying to do is just exempt a bunch of institutions from it altogether if they are not “big” enough. In my opinion, if you enjoy taxpayer backing, it doesn’t really matter how big or how small you are. If you don’t want the taxpayer support, then just don’t take it. But, of course, nobody does that. They are trying to not only exempt a bunch of smaller firms, they are also trying to get rid of a bunch of the reporting. Long story short, just essentially defang it.

But the good news … this is a great pivot point to do what we did in the health care battle, which is, yes, to fight back, but to ask for what we really want. I would urge people to push their members of Congress to sign onto Elizabeth Warren’s modernized Glass-Steagall, which is going back to the true separation of the casino banking and the boring banking and actually forcing firms to break themselves up.

That is a really good point: that we have a lot of policies like this under Obama, that were a little piece of what we want and then, a lot of compromises with right-wing policy ideas that the right was never going to want to go along with anyway.

It is like, you compromise with yourself and when you sort of pre-compromise, it never gets better from there. You are never like, “Oh, we did it wrong. Let’s make it stronger now.” It just sort of gets weaker over time. So, if you don’t start with the big bold idea, when it gets chipped away it just sort of dissolves into nothing.

I want to backtrack a little bit, because on the campaign trail, Donald Trump loved to play fake populist and to accuse everybody from Ted Cruz to Hillary Clinton [of] being in the pockets of Wall Street. I want to unpack that a little bit, but also, is there a space to use these various rollbacks that he is either directly or indirectly involved in, to play off some of his audience who maybe believed that against what he is actually doing?

We are certainly trying to do that at the organization that I work for. I think the problem is his core base just likes him as a person and I think that many of his voters, they are sort of animated by forces like racial resentment. Certainly, we are trying to call out the hypocrisy and we have pointed out many times that he said that hedge funds or private equity funds were getting away with murder and then he gave them a big present in the tax bill and a bunch of other places.

That brings us to the people that say they care about these things, but then vote for deregulating the banks….

There were 16 Democrats in the Senate and then Sen. Angus King, the Independent from Maine. Which is pretty surprising. He is usually better on these issues. Then, in the House, I think it was 33 Democrats who voted for this. Which is still high, but believe it or not, is actually a lower percentage than the percentage in the Senate. So, in a way, even though the number is higher, the House Democrats were more progressive on this bad bill than the Senate Democrats.

The Senate Democrats really pushed this. I mean, Mark Warner of Virginia — this is something that he said openly in interviews, “We have been pushing this for long since before Trump came into office. This has nothing to do with Trump.” And this was the kind of thing that would not have been able to pass in the Senate without Democratic support, unlike the House where they could have passed it regardless.

There were a bunch of rules for banks with over $50 billion in assets. Those are enormous banks. Just a higher level of scrutiny, a higher level of monitoring. This bill raises that extra monitoring from banks over $50 billion to banks over $250 billion. The banks in that sort of intermediate spot between $50 billion and $250 billion…. First of all, $249 billion is still a quarter of a trillion dollars. That is still an enormous amount of money. These are banks like Capital One and BB&T.

If people remember the name Countrywide, that was a huge, huge player in the crisis. They were responsible for tons of subprime mortgages. They originated one out of five of every mortgage in the country and they were around $100 billion. Now, they don’t exist anymore because Bank of America bought them up, but the point is, banks of that size have been significant in crashes in the past and, presumably, will be significant in crashes in the future. And this really stodgy government agency, the Government Accountability Office, was asked to evaluate the risk that this bill presented, and did it present the larger risk of a future bailout, and their answer was, “Yes.”

The other thing that the bill did that is really offensive is that, after Dodd-Frank, they increased the amount of data that banks needed to report through something called the Home Mortgage Disclosure Act. Basically, that data is used to catch racial discrimination in lending … discrimination in lending, period. They were already publishing some data, but they weren’t giving, for example, credit scores. Sometimes you will see things where a Black American will have the same credit scores as a white American and the same income, but they will get the bad mortgage and the white American will get the good one. We need that information to catch that.

Part of this bill also exempts basically four out of five banks in the country from doing that extra reporting. It is basically giving a green light to more discrimination in lending, or at least making it really hard to catch it when it happens….

They argued that these were community banks, that this wasn’t just a giveaway to Wall Street.

They absolutely did…. The other thing is, some of this stuff also impacted foreign banks that are definitely not community banks. There were little gimmes to Deutsche Bank and UBS, too, in this because Deutsche Bank and UBS are obviously bigger than $250 billion, but their US branch isn’t. So, UBS and Deutsche Bank also get to benefit, at least on the US side from this bill. It is just nonsense.

In my opinion, a lot of folks just wanted to do a bipartisan thing. And they felt like this was the bipartisan thing that they wanted to do. And you know, it has the benefit of more campaign contributions and all that, but I could never find a coherent argument for why this legislation…. Even if I disagreed with it, which I did, no one really articulated one. Everything they said was just not true. “Oh, it is for community banks.” That is not true. “Oh, small banks are getting squeezed.” Also, not true.

And again, I cannot imagine that the sort of mythical Trump voter in West Virginia or Arizona or wherever is chomping at the bit to give $50 billion institutions more leeway to do whatever they want. I just can’t imagine this is a popular issue.

No, it is not. My organization had a poll done about this and you are right. They are not. The polling on this was bad regardless of political party…. I think what they were banking on is we are in this media environment when there is just so much trash on fire all the time, that they were like, “Maybe people won’t notice.” But we did see a lot of op-eds in local papers in red states about this, and I do think that people, to the extent that they heard about it, were not happy. I don’t think it was strategic, but … I don’t know. They seem to think it was.

We haven’t moved on from 2008…. Every political issue that is alive — not only in the US, but across the world — is clearly in the shadow of 2008. It is striking to me sometimes how little politicians still seem to get that.

That is always the problem, because they are wealthy, for the most part. If I put aside my day job hat for a second and just speak in a personal capacity, most of these politicians are incredibly wealthy and so they are just totally out of touch and they don’t know. There was a hearing, I remember, either before the financial crisis or right after, and I unfortunately can’t remember who asked this question, but someone was like, “How many of you know anyone who has been foreclosed on [or] been foreclosed on yourselves?” and none of the politicians were able to raise their hand because they just live in this bubble….

How can people keep up with your work and keep up with what is going on with Deregulate-A-Palooza so that they can respond to these things when they are happening?

My day job, I work at Americans for Financial Reform. Our website is and at the top right there is a button “Join Our Mailing List.” We send out alerts pretty much every week, either with a request to email your senator or your house member or to call them, but usually it is email. We pre-write the email for you and everything and it is really easy. That is a great way if you do want to keep up with every bill and every piece of deregulation. We will definitely be sure to do that. You can also follow me on Twitter. I am @alexisgoldstein and I talk about this on my podcast Humorless Queers, too, but we try to be like, “And here is how you can stop this,” or “Here is where you can complain about this.” “Humorless” is meant to be a joke. We do try to make it funny.

This interview has been lightly edited for clarity and length.

Interviews for Resistance is a project of Sarah Jaffe, with assistance from Laura Feuillebois and support from the Nation Institute. It is also available as a podcast on iTunes. Not to be reprinted without permission.