Tailor-Made for Disaster

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Today the Federal Reserve is wrapping up a yearlong journey that began with a single word.

The main bipartisan accomplishment of the Trump era was a bank deregulation package I like to call the Crapo bill, after the Senate Banking Committee chair who authored it and the general quality of the legislation. That bill included a change to the Fed’s tailoring rule, which means that it “tailors” its supervision of banks based on size or the amount of risk. Previously tailoring was optional for the Fed. But the Crapo bill changed the language from “may” to “shall.” That required the Fed to assess all its rules and ensure that they be tailored to each specific bank.

This is a litigation bonanza waiting to happen, as any bank could just perpetually claim that the Fed didn’t do proper tailoring whenever the Fed tried to regulate. But the near-term consequence is that Randal Quarles, Donald Trump’s hand-picked head of Fed supervision, took the path Congress constructed to deregulate practically the entire system.

It culminates today, when the Fed votes on a plan that will roll back capital and liquidity requirements for all banks holding less than $700 billion in assets. That would be all but four of them. The rule splits banks into four separate categories, delivering significant relief to the bottom three. Foreign-owned lenders will apparently be eligible for this as well. The Fed also plans to overhaul the living-will system, whereby banks must submit a plan to unwind themselves in the event of trouble. These will now be updated every four years instead of every year.

This continues the trajectory of pulling back the already meager restraints on bank activities instituted after the financial crisis. The pendulum has been swinging away from safety. This may not end up being perceived as Trump’s legacy, since the implications will likely not be felt until after he leaves office. But it’s certainly part of the picture. And you can’t fully paint it without filling in the 16 Senate Democrats and 33 House Democrats who helped Trump along the way, many of whom did it to collect bank donations for re-election and ended up losing anyway. Heidi Heitkamp, Bill Nelson, Claire McCaskill, and Joe Donnelly, take a bow.

A second Trump administration will cement a right-wing majority on the Supreme Court for a generation, and put our collective future in the hands of someone who will be virtually unchecked by our institutions. The country has shifted rightward, and the reverberations will ensue for potentially the next few decades. In this climate, a robust independent media ecosystem will be more important than ever. We're committed to bringing you the latest news on how Trump's agenda will actually affect the American people, shining a light on the stories corporate media overlooks and keeping the public informed about how power really works in this country.

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