Last month, Congress agreed to free thousands of banks from tight restrictions put in place by the 2010 Dodd-Frank law – legislation put in place to prevent a new financial crisis.
According to Money Morning Capital Wave Strategist Shah Gilani, we shouldn't be surprised.
"It's no surprise that Congress is pushing bank deregulation," Gilani said. "After all, it's a midterm election year, and both parties want bank and financial services money directed their way."
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Ever since the Republican Party assumed control of Congress in 2012, conservative leaders have pushed to roll back banking regulations in an effort to turbocharge financial growth.
As Money Morning Capital Wave Strategist Shah Gilani points out, this isn't new. "It's no surprise that Congress is pushing bank deregulation.
by Shah Gilani
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The Senate just passed The Economic Growth, Regulatory Relief, and Consumer Protection Act, which, for all intents and purposes, is a bank deregulation bill.
Of course, this comes on the heels of the U.S. House of Representatives' Systemic Risk Designation Improvement Act, a like-minded bill passed on Dec. 19, 2017.
Next, as we all remember from high school civics, the two chambers will reconcile their versions and deliver legislation to the president for signing, which he will almost certainly do, with great relish.
It's no surprise that Congress is pushing bank deregulation. After all, it's a midterm election year, and both parties want bank and financial services money directed their way.
The Senate's 67-31 vote, with 16 Democrats siding with the Republican majority, proves it's a bipartisan push, despite some compulsory, loud Democratic opposition.
Nor will it come as any surprise that after blowing huge holes in the post-crisis-era Dodd-Frank wall that protects consumers, the economy, and taxpayers from bad bank behavior, more rules and regulations will be whittled away soon.
That's going to be great for big banks and big financial services companies… for a while.
It's not hard to envision them coming up with new and interesting ways – and some old "classic" ways – to leverage up their balance sheets in pursuit of profits and blow themselves up again.
Look, I'm all for growth. I'm all for capitalism. But I'm not for putting the entire economy at hazard… all over again.
That's what's wrong with what Congress is doing. I can show them what they should be doing to fix this problem once and for all.
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The U.S. Department of Justice announced it's seeking a record $14 billion penalty against Deutsche Bank in relation to mortgage securities fraud in the run up to the global financial crisis that's roiled markets since 2007.
Another naughty bank, another big fine. Regulators quietly charge banks and financial institutions with rules and policy violations all the time. Most of them are settled just as quietly after a bunch of legal wrangling, without causing so much as a blip in the headlines.
So what's the big deal?
Well, Deutsche Bank is facing a $14 billion fine at a time when the bank has "litigation reserves" of just €5.5 billion ($6.17 billion). It simply doesn't have the cash on hand to pay just the penalties sought by U.S. regulators as it stands today.
What's more, that $14 billion fine stems from just one of the more than 7,000 ongoing legal cases, according to The Guardian.
These problems are bad, but they pale in comparison to the problem no one's talking about...
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