As the New York Times details today, the banking industry is gaining support in the Senate for weakening Dodd-Frank banking rules, mostly by limiting regulation on banks with less than $250 billion in assets.
A large part of this is caving into the banking industry, but it's worth noting that the recent progressive anti-monopoly "big is bad" discussion of the economy in general and banking in particular contributed in some ways to the ideological opening used to push this particular bill.
In this case, the bill righteously keeps full regulation on the top 10 banks while loosening it or eliminating it for smaller ones. And the justification:
"lobbyists have pointed out that rules ushered in after the financial crisis have in some ways been beneficial for the big banks, acting as a barrier to entry for any bank without the resources to handle the additional compliance costs."
The banking industry has eagerly jumped on the anti-monopoly argument to try to free "small banks" (goliaths in fact of up to $250 billion in assets) from many of the Dodd-Frank rules. Thus, new banking regulations are being sold as increasing competition and consumer protection in the banking industry.
The reality is that lots of shitty and reckless businesses, including banks, competing to ripoff customers is not automatically better than a more concentrated marketplace with tighter regulation.
Now, it doesn't have to be an either/or situation but there is a brutal truth that regulation DOES create fixed costs which larger businesses more easily absorb-- which progressives have in the past often hailed since smaller businesses are often far more exploitive of both workers and consumers. Now, uncontrolled monopoly is a danger as well, but tightly-regulated concentration in an industry has often yielded better paying jobs and often better results for consumers, since regulators can concentrate their firepower on a few big targets.
The counterdanger is big firms capturing the regulators but diffuse firm business associations, as this bill highlights, can do the same and often to an even more pernicious level by waving the mom-and-apple pie "small business" flag.
I've written politically and academically about the need for tougher antitrust action but I have overwhelmingly seen it in the frame of using consent decrees to strengthen oversight of big firms and less about breaking them up into some faux ideal of perfect capitalist competition. My ideal antitrust is more the 1913 and 1956 consent decrees with AT&T which kept its dominance in place but respectively required interconnection by smaller phone companies and kept the company from leveraging its position to move into the computer industry. This led to the United States having the most universal access to affordable phone service in the world provided by workers with hundreds of thousands of well-paying jobs.
In my view, too much of the current antitrust rhetoric is focused on the 1982 antitrust action to breakup AT&T into the Baby Bells -- which was a disaster for local phone service but a massive gain for the wealthy who saw both spikes in their AT&T stock holding and decreased prices in long distance prices used disproportionately by businesses and richer consumers. The whole system that had channeled profits from the lucrative long distance market into funding the basic costs of local phone infrastructure and ensuring universal service was lost. And the result was fragmented and still incomplete deployment of broadband at ruinously high costs for many consumers.
Better regulation of AT&T in the 1980s, not breakup, would have led to arguably earlier and unquestionably more universal deployment of broadband at better prices for more consumers.
Similarly with the banks, progressives should unquestionably be looking at the danger of the largest banks having too much power but too much focus on “breaking up the big banks” creates an ideological opening for exactly the kind of legislation moving through the Senate right now. The 1970s in general saw a whole range of deregulation, from trucking to airlines to the telecommunications industry, that used anti-monopoly rhetoric by progressives but left in its wake a whole range of predatory firms cheating consumers and turning what had been solid union jobs into crappy ones.
So while I am fully on board with the new danger of unregulated capitalism in the current economy, especially among many of the technology titans that have arisen, we need far more of our ideological firepower focused on the need for better regulation and far less about some faux ideal of competition among “small” rivals leading to better results for consumers. Regulation not competition is what we need to emphasize.