Washington — Louisiana Republican David Vitter ranks with the most conservative members of the U.S. Senate, but he’s generated a considerable amount of attention for his across-the-aisle work on a bill to update federal regulation of toxic chemicals. On Thursday, he and the legislation’s other leading sponsor, Democrat Tom Udall, of New Mexico, held a news conference to publicize that 14 additional senators — seven Democrats and seven Republicans — have signed onto the bill, bringing the thoroughly bipartisan total to 36.
That same day, Vitter issued a news release announcing another bipartisan collaboration, with a Democratic partner at least as unlikely as Udall: Elizabeth Warren, of Massachusetts, the liberal firebrand and champion of the left. They have introduced a proposal called the Fed Accountability Act, which aims to give more independence to individual members of the Federal Reserve Board and to make its decision-making more transparent.
“We disagree on a whole lot of things, to state the obvious,” Vitter said. But it’s not the first time he has worked with Warren: “It’s been a real productive partnership,” he said.
Both Vitter and Warren serve on the Banking, Housing & Urban Affairs Committee, and they share an enemy: the big Wall Street banks.
Vitter’s particular bête noire is the concept of “too big to fail,” the philosophical underpinning of the massive federal taxpayer bailout of Wall Street megabanks in the Great Recession that was designed to stave off a collapse of the entire financial system.
In the 2013-14 Congress, Vitter teamed up with another liberal Democratic senator, Sherrod Brown, of Ohio, on a bill to impose regulations on the megabanks to make it less likely they would get too far out over their skis and require rescuing. That bill did not go anywhere — Vitter says he didn’t expect it to, given Wall Street’s opposition — but he is working with Brown on a renewed attempt in the current Congress.
Also in the last Congress, Vitter joined with Warren in an attempt to block the repeal of a post-recession regulation that aimed to protect taxpayer-financed banking-insurance programs from exposure to risk in the banks’ trading of derivatives, the kind of financial instruments implicated in triggering the 2008 financial crisis. They failed, and the repeal, which had been added by the Republican-majority House of Representatives to an overall government spending bill, was signed into law by the president.
In the current Congress, Vitter is also working with Warren on legislation to restrict the ability of the Federal Reserve Board to bail out banks.
Vitter acknowledges the banking initiatives enjoy more support among Democrats than Republicans, but he’s optimistic that can change.
“Politically, I think there continues to be great support in the public to truly end ‘too big to fail,’ ” he said. “The fact that I’m working with Elizabeth Warren on this proves that.”
If Wall Street megabanks are Vitter’s least-liked financial institutions, then his favorites are small and mid-sized community banks. The diversity in the size of banks in the United States, compared to the financial sector in other countries, is a national strength, Vitter said. He successfully backed legislation early this year that requires the seven-member Federal Reserve Board to include at least one member from the community-banking sector.
Vitter participated in a meeting Monday with community bankers in Baton Rouge to discuss a report by the University of New Orleans showing a steep decline in the number of community banks in Louisiana and across the nation over the last 20 years, as the number of bigger banks has increased.
“It shows what I knew in my gut,” Vitter said. “Since the crisis, the playing field has been tilted even more to the detriment of community banks.”
Vitter argues that too-big-to-fail policies provide megabanks with a competitive advantage over smaller banks in borrowing money because they represent a government guarantee of the big banks’ stability.
He’s also sensitive to a complaint raised by community bankers at the Monday meeting: that they are being crushed by the cost of complying with the regulations adopted by Congress in the aftermath of the Great Recession — a burden that weighs much more heavily on a small bank than on a giant Wall Street institution.
Vitter intends to circulate the UNO report among his colleagues in Congress. And he said the proposal he is developing with Brown includes regulatory relief for smaller banks.
Gregory Roberts is chief of The Advocate Washington bureau. His email address is firstname.lastname@example.org, and he is on Twitter, @GregRobertsDC. For more coverage of national government and politics, follow The Advocate Politics Blog at http://blogs.the advocate.com/politicsblog/.