In recent times, it has felt like even bipartisan agreement that a major problem exists can’t provide sufficient momentum to find legislative solutions that can garner bipartisan support. After the financial crisis of 2008, few disagreed that the financial system needed serious improvements. However, finding a bipartisan agreement in Congress for how to make those improvements was extremely difficult and was ultimately beyond reach. This is a significant departure from the historical bipartisan consensus that has shaped our nation’s financial regulatory landscape for generations.
The regulation of banking was traditionally a “hot button” political issue. Our founding fathers fiercely debated whether to create a central bank. While Hamilton won the argument at first, with the establishment of the first and then second central banks, the next generation of Jacksonians triumphed and the central bank was eliminated. It was not until Abraham Lincoln’s presidency that national regulation and federal chartering of banks would return.
After a series of devastating financial panics, culminating in the panic of 1907, the political consensus necessary to create a central bank re-emerged. This movement culminated in the passage of the Federal Reserve Act of 1913, under President Woodrow Wilson. The next financial crisis, the Great Depression, served as a catalyst to a series of major financial regulatory reforms, whose legacy still shape our market structure today.
Between the Great Depression and the financial crisis of 2008, many major laws were enacted creating our financial regulatory system. Some strengthened the regulatory system, often in response to crises. Some reduced regulation in an attempt to promote market efficiency. What they had in common was that they attracted large bipartisan support. Both parties worked together to develop a system that they jointly supported.
Take, for instance, the Bank Holding Company Act of 1956. A major regulatory development in its time, it passed the Senate with 58 votes in favor and only 18 votes against. This vote in favor went across party lines and brought 35 Democrats together with 22 Republicans to support passage.
Bipartisanship was also alive and well when major legislation passed in response to the savings & loan crisis of the 1980’s. A key legislative response to this crisis was the Federal Deposit Insurance Corporation Improvement Act of 1991, also known as (FDICIA). This act was a major legislative change at the time, as it increased FDIC supervision power, recapitalized the FDIC deposit insurance fund, and required the FDIC to intervene earlier with troubled institutions. The House’s final vote was taken by voice, so there is no record of their vote. However, the Senate’s final vote on FDICIA was 68-15, with 17 Senators not voting. One of the parties cast 36 votes in favor, 13 votes against, with 8 not voting. The other party cast 32 votes in favor, 2 votes against, with 9 not voting.
Looking at these votes, can you guess which party was which? Here’s a hint: Republicans voted “yes” less, but Democrats voted “no” more.
Only a few years later, Congress passed the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, which fundamentally altered the U.S. banking industry by allowing banks to more easily operate in multiple states. The Riegle-Neal Act passed with overwhelmingly bipartisan support, garnering 94 votes in the Senate and passage by voice vote in the House.
A more recent example of bipartisanship came at the end of the Clinton administration, when the final version of the Gramm-Leach Bliley Act (GLBA) received overwhelming support by both parties in both houses of Congress. Among the GLBA’s most notable features was the repeal of restrictions on banks affiliating with other financial firms (repealing Glass-Steagall). The Senate vote on GLBA was 90-8 with the support of 52 Republicans and 38 Democrats. The House vote was 362-57, with 207 Republicans and 155 Democrats supporting passage.
Even after the 2008 crisis, bipartisan support could be found for substantial financial regulatory changes. For instance, the Credit CARD Act of 2009, which strengthened credit card protections and prohibited certain practices, received strong bipartisan support. In the House, 105 Democrats joined with 174 Republicans to vote for passage. In the Senate, 55 Democrats joined with 35 Republicans in favor of passage.
It may be interesting, then, to learn that Dodd-Frank was passed on essentially a party line vote.
Dodd-Frank passed the House of Representatives on June 30, 2010 with a 237-192 final vote. Democrats supplied 234 of those votes and 3 Republicans voted in favor of passage. A similar outcome took place in the Senate when they voted 60-39 in favor of passing Dodd-Frank. Democrats supplied 57 of those votes with 3 of their Republican colleagues.
Fortunately, there are promising signs that a more bipartisan era may come back. Senator Mike Crapo (R-ID), the new Ranking Member of the Senate Banking Committee, has expressed a desire for more compromise, noting that “there is more to agree on than meets the eye.” We hope that in this new Congress, both the House and Senate can find some of its old form, and find the type of common ground that used to be more, well, common.