In a final indignity, Sen. Tim Kaine, D-Va., has offered an amendment essentially striking a controversial provision from bipartisan bank deregulation bill S.2155 that would limit tools prosecutors use to detect mortgage lending discrimination, while acknowledging that the amendment probably wouldn’t get a vote — and wouldn’t be necessary for his ultimate support.
At issue is Section 104, which exempts all banks and credit unions issuing 500 mortgages or less a year from enhanced Home Mortgage Disclosure Act, or HMDA, data requirements used to identify lending discrimination. This would cover 85 percent of all regulated mortgage lenders from the new requirements, which were part of the Dodd-Frank Act.
The 17 members of the Democratic caucus who support S.2155 have taken significant heat from their colleagues over this measure, which critics believe would deeply damage fair lending enforcement by making the new HMDA data incomplete and unreliable. The subprime crisis, which disproportionately fell on black and brown borrowers, proved that new data for housing discrimination was necessary, but this provision would wipe that away.
Kaine, the former vice presidential nominee who began his career as a fair lending attorney, issued a statement today praising S.2155, arguing that it improves current law through a targeted approach to assist community banks. But he added this:
The bill is a compromise, and I think it can be improved in certain respects. The legislation currently requires that banks writing 96 percent of American mortgages must comply with elevated Home Mortgage Disclosure Act (HMDA) reporting requirements. I have filed an amendment to the bill to require even more banks to provide enhanced data on mortgages, and I hope we will get the opportunity to vote on this change.
Kaine’s amendment would indeed require more banks to provide data. In fact, it would lower the exemption threshold from banks issuing 500 mortgages a year to 100. That’s where the Consumer Financial Protection Bureau put the threshold in its initial HMDA final rule for open-ended loans like home equity lines of credit; for traditional mortgages the threshold was to be 25 loans. But the Kaine amendment did roll back the threshold significantly, going almost as close as a senator can to saying to his opponents, “You were right and I was wrong.”
The four lead Democratic senators who coauthored S.2155 — Sens. Jon Tester, D-Mont.; Joe Donnelly, D-Ind.; Heidi Heitkamp, D-N.D.; and Mark Warner, D-Va. — cosponsored the amendment, agreeing that effectively nullifying Section 104 would be the right move.
Senate Majority Leader Mitch McConnell, R-Ky., needs those Democrats on the bill to get to 60 votes. If the Democrats on the Banking Committee backed away, other Democrats would follow and Republicans would need to deal. Why aren’t they doing it?
Tester, Donnelly, and Heitkamp are all facing re-election in states Trump won handily, and where he is still popular. The last line of Kaine’s press release tells you everything about this effort: “I hope we will get the opportunity to vote on this change.” That is not a promise to get a vote on the amendment, nor is it a definitive statement that the amendment would be a condition of Kaine’s support. It just means Kaine and his fellow Democrats introduced an amendment he suspects won’t ever see the Senate floor.
If these Democrats were truly interested in reversing Section 104, they could have simply endorsed the amendment from Sen. Catherine Cortez Masto, D-Nev., which reads, simply, “Strike Section 104.” Whether those or any amendment will get votes this week is still being negotiated.
Furthermore, Democratic supporters could have demanded that either Sen. Cortez Masto’s amendment or their own get into the substitute amendment, a set of corrections and additions to the bill released last week. Instead, Section 104 of the substitute includes a fig-leaf alteration mandating bank compliance with enhanced data if they receive a low rating in two successive Community Reinvestment Act examinations. CRA exams come, at most, once every three years, and over 97 percent of banks pass the test — so this would affect almost no lenders, and not for years after any lending discrimination ensued.
The Senate moved to end debate on the substitute amendment Monday evening by a 66-30 count. There were no defections from Democratic supporters from the first test vote last week. That means Kaine, Tester, Donnelly, Heitkamp, and Warner all closed debate on the substitute, without demanding the change to the HMDA provision they all claim to want. As the lead supporters of the bill on the Democratic side whose votes are needed to overcome a filibuster, achieving the change is easily within their capabilities.
Kaine gave the entire game away on Monday when asked directly about the amendment by Brian Cheung of S&P Global Market Intelligence. He admitted, “I don’t need my amendment to pass” to support the underlying bill. “I think the bill is solid as it is,” Kaine added.
In other words, Kaine wants to tell allies that he “fought” to reverse the fair lending provision. His running mate’s husband, former President Bill Clinton, has a term for the political maneuver. It’s called being “caught trying.”
The Intercept asked Sen. Kaine’s office to clarify his position. They have not yet responded.
In a related development, Sen. Bob Corker, R-Tenn., has introduced a one-line amendment to eliminate the “Citigroup carve-out,” which allows custodial banks to reduce their leverage requirement. There’s been a question over whether Citigroup and JPMorgan Chase, which have custodial business lines but aren’t primarily custodial banks, could take advantage of the reduction. But Corker’s amendment eliminates the provision entirely.
The battle over the Affordable Care Act showed that Congress still cares about public opinion. But as long as the Senate is feeling little pressure to make it happen, Corker’s amendment is as likely as Kaine’s to get a vote on the Senate floor.