Idaho Senator Mike Crapo's Bill Would Ease Financial Rules Addressing Great Recession Crisis

Mar 15, 2018

Senator Mike Crapo's bill would ease financial regulations established in the wake of the 2008 economic crisis.
Credit fossilmike / Flickr

Idaho Senator Mike Crapo’s bill to ease financial protections established by the Dodd-Frank Act passed in the wake of the 2008 financial crisis got the green light from the U.S. Senate this week. Crapo’s proposal drew bipartisan support.

Crapo's proposal would increase the threshold at which banks are considered too big to fail. That ceiling would jump from $50 billion in assets to $250 billion. By upping the cap, smaller banks and credit unions would be freed from some of the scrutiny imposed by the 2008 Dodd-Frank Act.  

“From an economic perspective, it’s a reasonable question to ask whether all of these rules should remain in place when the economy is functioning at a normal rate,” says Brandon Julio, a finance professor at the University of Oregon.

He says many think Dodd-Frank had too broad a reach. Until there’s an actual economic crisis, Julio says, it’s hard to know what banks or companies would be impacted.

Under Crapo’s bill, entities below the $250 billion threshold could eventually be exempt from having to undergo an annual stress test conducted by the Federal Reserve.

“I always think about it as any company that’s likely to be bailed out by the government should go through one of these stress tests,” says Julio. “This is really a taxpayer liability.”

The House already passed an even more expansive rollback of Dodd-Frank than Senator Crapo’s proposal. A version of the bill will now be drafted incorporating aspects from the House and the Senate editions.

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