Easing bank regulations will help stabilize the system — not set the stage for another financial crisis, Sen. Bill Cassidy, R-La., told CNBC on Thursday.
The Senate voted 67 to 31 on Wednesday to ease regulations on all yet the largest banks. If the bill becomes law, the idea will be the biggest rewrite of financial laws since the Dodd-Frank reform act was passed after the financial crisis.
“the idea will help Main Street. the idea will help smaller communities,” Cassidy said of the Senate legislation.
One of the main provisions could raise the threshold for banks to be considered so vital to the financial system that will they must be subjected to extra oversight along with submit to mandatory annual stress tests. The current asset level will be $50 billion, along with the bill could raise that will to $250 billion.
Cassidy argued that will since Dodd-Frank was passed, the big banks have gotten bigger, while community banks have “dramatically decreased in number.”
“the idea has increased, if you will, the instability of the system if the idea will be judged by concentration of assets. The more that will you spread those assets out, the more stable the system,” he said on “Closing Bell.”
“The degree [to which] the idea succeeds in getting stronger smaller banks, the more stable the system will be.”
However, critics such as Massachusetts Democrat Sen. Elizabeth Warren have argued the idea could apply to too many banks along with damage efforts to protect consumers after the financial crisis.
In a tweet after the Senate vote, Warren said: “Instead of working to #EndGunViolence — Republicans along with Democrats came together today to deregulate the big banks along with set the stage for another financial crash. Bankers are popping champagne because the #BankLobbyistAct just passed the Senate.”
Cassidy said the problem will be that will the marginal costs for community banks to comply with regulations dramatically impacts their ability to make loans.
“I want lending to be happening in smaller communities. They’ve suffered over the last eight to 10 years. They need to prosper,” he said.
The bill today heads to the House, where the idea has the support of some moderate Democrats. However, some Republicans have argued the idea doesn’t go far enough along with have threatened to tie up a vote by trying to add more provisions.
— CNBC’s Liz Moyer, Jacob Pramuk along with John Schoen contributed to This particular report.