By Oscar Valdés Viera, Senior Policy Analyst, Private Equity & Capital Markets
Last month—and on the sixteenth anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the fifteenth anniversary of the day the Consumer Financial Protection Bureau opened its doors—the House majority advanced legislation to weaken major safeguards established after the last financial crisis. Wall Street banks have been lobbying for years to tear down the Dodd-Frank reforms that have staved off major financial crises for the past decade and a half. This latest legislation threatens to make the financial system less resilient and more vulnerable to crises while we are facing mounting and significant financial risks from private credit, the AI bubble, and cryptocurrency.
Proponents of this deceptively-named Main Street Capital Access Act (H.R. 6955) cloak their support for big bank deregulation by claiming to protect community banks from burdensome regulatory red tape. But wholesale deregulation exposes people and communities to abusive gouging, predation, and discrimination and can endanger the whole economy.
This bill is not a narrow relief for genuinely small and community banks. It is a broad deregulation package that would steadily allow larger and more complex institutions to escape current safeguards; make it harder for examiners to identify and correct problems; weaken enforcement and merger review; and expand bank ties to fintech, crypto, and commercial businesses. Some provisions would ratchet up key regulatory thresholds every five years, without even evaluating whether the institutions had grown riskier or more interconnected. Others would narrow the scope of bank examinations or give banks special ways to challenge and delay supervision. Taken together, the bill would reduce scrutiny as institutions grow and give regulators fewer tools to act before problems spread.
Deregulation promotes excessive risk taking and erodes public protections
The bill weakens safeguards that are the most basic lines of defense between private risk-taking and public harm. Capital requirements make banks put more of their own shareholders’ money behind their risks and prevent them from betting the bank on borrowed money. Liquidity rules help them meet withdrawals during periods of stress. Robust supervision allows examiners to respond to weak management, dangerous practices, and mounting risks before they become full-blown emergencies. Fair-lending disclosures expose redlining and disinvestment and merger review protects competition, branch access, and the availability of credit. These protections perform different jobs, but they all make sure that financial institutions shoulder more of the risks they create instead of transferring the costs to workers, borrowers, and communities.
As it usually happens, weakening these tools does not eliminate costs—it transfers them.
Bank shareholders and executives gain more freedom to expand, merge, borrow, and take risks. The potential windfall profits remain private. But when the risks go bad, the costs spread and depositors panic, small businesses lose credit, workers lose jobs, communities lose branches, and the government is pressured to intervene to prevent broader collapse.
Ignoring the lessons from the 2023 banking crisis
The last wave of bank deregulation during the prior Trump administration paved the way for a regional bank crisis that led to three of the biggest bank failures in U.S. history. The 2023 regional bank crisis demonstrated that the combination of automatic exemptions and weaker supervision is incredibly dangerous. Silicon Valley Bank’s executives built a highly concentrated bank, relying heavily on a base of uninsured deposits and deep ties to the crypto industry, and failed to manage interest rate and liquidity risks. But those private failures were allowed to fester inside a weakened public oversight framework. As SVB expanded from $71 billion to more than $211 billion in assets between 2019 and 2021, it benefitted from the prior regulatory loophole that allowed it to meet far lower capital and liquidity requirements. As risks mounted, bank regulators were slow to recognize the severity of SVB’s vulnerabilities and even slower to force corrective action. The Federal Reserve later concluded that the new regulatory framework and a shift toward less assertive supervision had impeded effective oversight.
SVB’s collapse was quickly followed by three other banks (First Republic, Signature, and Silvergate) within one month. The government had to take extraordinary action to prevent the panic from spreading. H.R. 6955 would repeat the same mistakes, mechanically moving growing banks outside stronger safeguards, narrowing supervisory judgment, and giving institutions more ways to contest and delay examiners. That does not remove risks—it encourages banks to shield growing risks for longer before the public is asked to contain the damage.
Giveaway to big banks during protracted affordability crisis
Advancing this bill is particularly perverse in the face of the current affordability crisis. Families are struggling with the cost of housing, gas, groceries, insurance, and borrowing. Credit card interest and fees eat a huge portion of incomes month after month. Even the White House has called for a 10 percent cap on credit card interest rates. Yet rather than deliver relief to people, the House majority is delivering it to banks—from oversight and accountability.
Calling the bill a Main Street measure does not change who benefits. Weaker merger review can accelerate consolidation, especially in smaller towns and rural areas where people, small businesses, and farmers already have limited choices. Fewer competitors can mean fewer branches, worse customer service, higher costs, and less credit for small businesses and farms. Expanding merchant banking authority and bank-fintech or crypto ties would give the largest institutions more opportunities to combine financial power with commercial power—a recipe for self-dealing and disaster—while at the same time creating new conflicts and channels for risk.
Legislation erodes civil rights protections
The bill would also weaken economic and racial justice protections by excluding banks from fair lending and community reinvestment disclosure requirements. Its automatic threshold increases would gradually remove more institutions from coverage under the Home Mortgage Disclosure Act and the Community Reinvestment Act—civil rights laws that aimed to address longstanding racial discrimination by banks. These laws provide critical information and accountability concerning where banks lend, who they serve, and whether communities of color are being excluded from access to credit and capital. Raising thresholds to exclude more banks would make discrimination and disinvestment harder to see—without asking whether the banks have also become larger or more complex, interconnected, or important to their communities.
Putting profits before people and risking financial calamity
The legislation treats the compliance cost-minimizing, profit-maximization perspective of banks as the principal measure of good policy—without any real considerations of the costs to people, communities, or the economy. Compliance costs are counted; the cost of a bank failure is not. Banks are trusted to manage risk, while the public is expected to absorb the consequences when that trust is proved misplaced.
The 2008 financial crisis showed what happens when financial institutions become excessively large and powerful without adequate accountability. Millions of households lost their homes, jobs, and life savings when an earlier era of deregulation let financial firms supercharge excessive risks that drove the economy off a cliff. The Dodd-Frank reforms reduced excessive risk-taking, strengthened the resiliency of banks and financial firms, improved regulatory supervision, and required them to play by more robust rules.
Dodd-Frank’s stated purposes included promoting financial stability, improving accountability and transparency, protecting the public from bailouts, and protecting people from abusive financial practices. H.R. 6955 ignores the lessons of a financial crisis that devastated tens of millions of people and dismantles the safeguards that reduced the likelihood and severity of financial crises. Despite the major financial shocks since Dodd-Frank was enacted (the pandemic and the regional banking crisis), the financial system was resilient enough to stave off broader economic catastrophe. The Senate should reject this Wall Street deregulation package and focus instead on lowering household costs, expanding fair access to credit, protecting competition, and making the financial system safer. Main Street needs affordable financial services and a stable economy—not another round of privatizing gains while the public implicitly backs the risks.