Inside the Backroom Deal That Could Reshape American Banking Forever

The Senate Banking Committee room’s hallway has a subtle scent of burnt coffee and old carpet, the kind that permeates buildings where decisions are made in secret. A small group of bank lobbyists stood close to the elevators on a Tuesday afternoon last month, their phones in hand, their ties loosened, and their voices low. They didn’t appear victorious. They appeared worn out. More than anything else, that indicated that something was going on.

Depending on who you ask, what’s taking place is either the gradual, cautious removal of safeguards that took fifteen years and a near-collapse to implement, or the long-overdue modernization of American banking regulations. As is often the case with these situations, the truth is most likely entangled somewhere in between. Those who keep a close eye on this believe that the financial sector has been patiently waiting for a moment like this for the better part of ten years, and that moment appears to have finally arrived.

The agreement, which is still being negotiated as of this writing, would return some consumer protection oversight to state-level regulators while easing capital requirements for the nation’s biggest banks. Supporters call it common sense. It’s a giveaway, according to critics. The companies that stand to gain the most directly are JPMorgan, Bank of America, and Citigroup, whose combined balance sheet would dwarf the GDP of most countries. It is anticipated that smaller community banks—those that actually provide loans to your cousin starting a bakery in Akron—will experience some relief but nothing revolutionary.

The post-2008 hearings, when bank CEOs sat in long rows under harsh fluorescent lights and apologized in well-crafted statements, are difficult to forget. Nomi Prins, who worked at Goldman Sachs for many years before writing about the business, has long written about this exact pattern. She makes the direct and unreserved claim that the banks never actually lost. They gathered, reorganized, and bided their time.

You wouldn’t believe that any of this is being discussed if you were to stroll through lower Manhattan right now. There are still tourists all around the Charging Bull. The hourly bells of Trinity Church continue to ring. However, executives in the towers are reading memos that could, in less than a year, drastically alter how their balance sheets are set up, how much risk they can take, and how fiercely they can compete with shadow banks and fintech startups that have been eroding their profit margins.

Beneath all of this is a more subdued dialogue that hardly ever appears on cable news. Around the world, academics like Kevin Gallagher have been pushing for what they refer to as a “new Bretton Woods,” a comprehensive reconsideration of how international finance should benefit people instead of rent-seekers. Even though no one in the room wants to acknowledge it, there is a connection between that conversation and the marble hallways of Washington right now.

It is still genuinely unclear if this deal will proceed in its current form. The senators are using hedging. Wall Street is cautiously upbeat. Despite their loudness, consumer groups are frequently outspent in the calculation of these factors. As you watch this happen, you get the impression that a few dozen people in rooms most of us will never see are making the decision rather than voters or even legislators in any significant way. Perhaps it has always operated that way. This time, it just seems more apparent.