The Brown-Kaufman amendment to the Restoring American Financial Stability Act of 2010 was a bit of a blunt instrument. It created caps so no individual bank could hold more than 10% of the country’s insured deposits nor could they accrue liabilities in excess of two percent of our Gross Domestic Product. In other words, it was an attempt to get rid of banks that are so big that their failure would threaten catastrophe for the global economy.
In practice, the amendment required the six biggest banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley — to significantly scale down their size.
Now, there’s no doubt that this amendment would have addressed the problem it sought to fix with too-big-to-fail banks. But that doesn’t necessarily mean that it was a good way of addressing that problem. I don’t feel qualified to say. But I do think the roll call on the vote is instructive. Republican Sens. Shelby, Coburn, and Vitter voted for it, which I’m not sure how to interpret. It’s easier to understand the Democrats who voted against it. Our banking system is heavily concentrated in states like Massachusetts, Rhode Island, Connecticut, New York, Delaware, North Carolina, and South Dakota. Here’s the list of Democrats who opposed forcibly breaking up our biggest banks:
Akaka (Hawaii), Baucus (Montana), Bayh (Indiana), Bennet (Colorado), Carper (Delaware), Conrad (North Dakota), Dodd (Connecticut), Feinstein (California), Gillibrand (New York), Hagan (North Carolina), Inouye (Hawaii), Johnson (South Dakota), Kerry (Massachusetts), Klobuchar (Minnesota), Kohl (Wisconsin), Landrieu (Louisiana), Lautenberg (New Jersey), Lieberman (Connecticut), McCaskill (Missouri), Menendez (New Jersey), Bill Nelson (Florida), Ben Nelson (Nebraska), Jack Reed (Rhode Island), Schumer (New York), Shaheen (New Hampshire), Tester (Montana), Mark Udall (Colorado), and Warner (Virginia).
Geography was not destiny on this vote. It was co-sponsored by Kaufman of Delaware (who is not seeking re-election) and opposed by Tom Carper. Jack Reed of Rhode Island opposed it, while Sheldon Whitehouse supported it. Al Franken of Minnesota voted for it while Amy Klobuchar did not. You’ll notice that all six senators from New York, New Jersey, and Connecticut (all of whom caucus with the Dems) were opposed.
Another explanation is that a big percentage of the no votes sit on the Senate Banking Committee: Dodd, Johnson, Reed, Schumer, Bayh, Menendez, Akaka, Tester, Kohl, Warner, and Bennet. You can look at that in a couple of different ways. A generous view is that they all participated in the negotiations to mark-up this bill and voting for the Brown-Kaufman amendment would have been an act of bad faith. A less generous view is that they get a bigger proportion of their contributions from the banking industry than senators who don’t sit on the banking committee. A generous view might argue that they understand banking better than other senators and so have a better grasp of the unintended consequences that might result from limiting the banks in this way. A less generous view might argue that most of them are only sitting on the Banking Committee in the first place to protect one of the biggest employers in their states.
You can choose to view the vote in any light you want. But the vote did provide a window into how much pull the banking industry has in the Democratic Party. I am not saying for certain that the amendment should have been passed. I’m not sure what would happen if America limited banks this way and the rest of the world did not. It could lead to mass exodus of jobs and even the loss of New York City as the global capital of the world (hey, it happened to London). But the roll call is interesting and informative.
