Sen. Elizabeth WarrenElizabeth WarrenOn The Money — Democrats eye tough choices as deadline looms Under pressure, Democrats cut back spending Progressives push back on decision to shrink Biden's paid family leave program MORE (D-Mass.) maintained Thursday that the 2010 Dodd-Frank Wall Street reform law has helped community banks do better than big banks.
Warren made the claim at a Senate Banking Committee hearing on community banking regulations, during which she also chided Daniel Blanton, chairman-elect of the American Bankers Association (ABA), who testified.
Blanton and community banking officials have pushed for exemptions from certain parts of Dodd-Frank, such as mortgage-lending requirements, that they argue should only be applied to big banks.
They say that small- and medium-sized banks are being unfairly punished for big banks' role in the 2008 economic crisis and have found a sympathetic ear among centrist Democrats and Republicans.
"If as you claim community banks were particularly hard hit by Dodd-Frank's new rules, why are they making more money since the rules went into effect and doing better than big banks?" Warren asked Blanton.
"There's not a direct correlation between [the rules] passing and the success of the banks," Blanton answered.
Warren fired back, charging, "their profitability seems to suggest they're doing better than ever after the regulations went into effect."
She pointed to data from the Federal Deposit Insurance Corporation (FDIC) that found community bankers' earnings increased at a higher rate last year than the banking industry as a whole.
"I don't think it's because of the regulations that the banks are doing better," Blanton responded. "It's tangling up our process to do mortgages, it's making it much more difficult."
Their exchange was the second time this week that Warren, striking an aggressive tone, accused big banks of using small banks to weaken regulations. She also made the assertion at a Senate Banking hearing on Tuesday.
"We should be very skeptical of regulatory relief bills that are promoted as helping small banks but are pushed by ABA lobbyists for the big banks," Warren said at Thursday's hearing.
Most regulators define small banks as having $10 billion in assets, among other criteria. The definition allows those banks to be exempt from certain Dodd-Frank regulations.
Community bankers and credit unions are pushing to increase that limit to $50 billion. By comparison, JPMorgan, the largest U.S. bank, had $2.6 trillion in assets in 2014.
Tony Fratto, a partner at Washington-based Hamilton Place Strategies, which works with banks, criticized Warren for attempting to equate small banks to big banks.
"Apparently, 'big banks' and 'Wall Street' now includes supposed behemoths like ... the Bank of Hawaii," which has reported $14 billion in assets, quipped Fratto, a former White House and Treasury official in the George W. Bush administration.
Warren said at the hearing that "bank lobbyists love to come into our offices and talk about how community banks are being crushed and they need our help."
"But a lot of the time the changes that they're talking about aren't really about helping community banks," Warren said.
Fratto said that casting community bank relief as cover for Wall Street is "just ridiculous."
"Dodd-Frank is the biggest and most complex piece of legislation in the history of the U.S.," Fratto said. "We need honest debates over it and the regulations that flow from it."
Last month, officials at the Consumer Financial Protection Bureau proposed tweaking mortgage rules for smaller lenders, a lobbying victory for the community banking industry.