WASHINGTON — The Senate is preparing to scale back the sweeping banking regulations passed after the 2008 financial crisis, with more than a dozen Democrats ready to give Republicans the votes they need to weaken one of former President Barack Obama’s largest legislative achievements.

Congress’ appetite for pulling back bank regulations shows the renewed clout of the financial sector in Washington, not just in the Republican Party but also among Democrats.

Eight years after nearly every Senate Democrat backed a sweeping set of new rules for financial firms large and small, the party is now split, with moderates, several of them facing tough midterm election contests, working with the opposing party.

The core of the new bill exempts about two dozen financial companies with assets between $50 billion and $250 billion from the highest levels of scrutiny by the Federal Reserve, the nation’s central bank.

Sens. Susan Collins and Angus King of Maine indicated in separate statements issued Monday night that they will support the bill, saying it will help smaller community banks while keeping intact the Wall Street reforms that protect consumers.

Supporters argue that the legislation would bring much-needed relief to midsize and regional banks that were treated like their much larger counterparts under the 2010 legislation known as Dodd-Frank. Opponents say it would weaken the oversight needed to stave off the type of dangerous lending and investing that brought the U.S. economy to its knees.

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The Senate is due to take an initial procedural vote this week to move the measure forward, and if it eventually becomes law, it would be the most substantial weakening of Dodd-Frank since it was passed.

“On the 10th anniversary of an enormous financial crash, Congress should not be passing laws to roll back regulations on Wall Street banks,” Sen. Elizabeth Warren, D-Mass., said in an interview. “The bill permits about 25 of the 40 largest banks in America to escape heightened scrutiny and to be regulated as if they were tiny little community banks that could have no impact on the economy.”

Sen. Jon Tester, D-Mont., a Banking Committee member and one of the new bill’s leading Democratic supporters, said banks in his largely rural state have been going out of business in part because of the regulations imposed by Dodd-Frank.

“The Main Street banks, community banks and credit unions didn’t create the crisis in 2008, and they were getting heavily regulated,” Tester said, contending that “there’s not one thing in this bill that gives Wall Street a break.”

Critics dispute those claims, echoing a Democratic Party schism over financial regulations that pits liberals such as Warren and top Banking Committee Democrat Sherrod Brown, D-Ohio, against moderate-leaning Democrats including Tester and Sens. Heidi Heitkamp, N.D., and Joe Donnelly, Ind.

Many of the moderates face political pressure to establish a centrist voting record, particularly after voting against the Republican tax cuts in December. Tester, Heitkamp and Donnelly are all up for reelection in November in states President Trump won by large margins. All three helped negotiate the banking legislation with its Republican sponsor, Banking Committee Chairman Mike Crapo, R-Idaho.

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Yet the coalition of Democrats supporting the bill also includes lawmakers such as Tim Kaine of Virginia, Hillary Clinton’s running mate in the 2016 election, and Mark Warner, also of Virginia, who was among the lead authors of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act but also voiced concerns about over-regulating smaller banks.

Collins, a Republican who co-sponsored the current legislation, said she supported the Dodd-Frank banking reforms and that Congress must make sure that any changes to the law preserve the regulations governing large financial institutions that caused the 2008 financial meltdown.

“We do, however, need to provide relief for community banks and credit unions. They had nothing to do with the financial collapses and are struggling with the complexity of some of the regulations imposed by the (2010) law,” Collins said.

“This bipartisan legislation, which I’ve co-sponsored, will update and more narrowly tailor the regulations that govern smaller financial institutions, making it easier for them to provide services to working families and small businesses, while also ensuring important consumer protections remain intact.”

King, an independent, said the proposed legislation will not unravel Dodd-Frank.

“The Wall Street reforms that protect consumers are still in place, and the bill would put additional consumer protections in place to help seniors, veterans, renters and victims of fraud. This is a bipartisan bill and was thoughtfully negotiated over several years,” King said in a statement issued Monday night. “It is a refinement that will provide targeted relief for small institutions like community banks and credit unions so they can continue to be sources of strength for homeowners, rural businesses, and local economies.”

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“Maine’s community banks and credit unions didn’t cause the financial crisis. They shouldn’t have to pay for it and neither should Maine people,” King added.

The Republican-led bill appears to have a clear path to becoming law. The level of Democratic support all but guarantees that the bill will have the 60 votes needed to pass the Senate, which will move toward debate on the legislation with a procedural vote set for Tuesday. And the Trump administration has been broadly supportive.

The House has already passed legislation that would repeal larger chunks of Dodd-Frank, so proponents’ biggest remaining challenge may be to reconcile the House and Senate versions. Senate Democrats backing their version say they’ll resist any significant changes.

Senate Minority Leader Chuck Schumer, D-N.Y., who represents Wall Street and is often motivated by the desire to protect his vulnerable red-state incumbents, opposes the bill, but he has taken a largely hands-off approach to the debate thus far.

That a Wall Street regulatory rollback is possible is a testament to the financial sector’s improved standing on Capitol Hill – as well as to the lobbying muscle of local banks and credit unions present in every state.

Financial firms upped their campaign contributions to key Senate Democrats over the last year, with Heitkamp, Donnelly and Tester becoming the top three Senate recipients of donations from commercial banks so far in the 2018 campaign cycle, according to the Center for Responsive Politics. The senators disputed any connection between the donations and their support for the Dodd-Frank rewrite legislation.

Lobbying efforts ramped up as the Senate debate approached. The Credit Union National Association descended on Washington in late February to meet with lawmakers. More than 5,000 credit union advocates, including employees and chief executives from every state, arrived on Capitol Hill wearing “vote yes” pins and stickers. They held 600 meetings with lawmakers.


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