Senate Passes Bill Rolling Back Dodd-Frank Rules

and on Bloomberg dot com slash podcasts. Yesterday, the US Senate took the most concrete steps so far to rollback rules adopted in the wake of the two thousand eight financial crisis by passing a bill amending the Dodd Frank Act and providing considerable regulatory relief to smaller lenders such as regional and community banks the name's sake of the Dodd Frank Bill. Former Congressman Barney Frank spoke with Bloomberg

about the proposed Senate changes last Tuesday. Um, I I think some of the critics in the Laptop being too our. It has one good thing. If this bill passes, that's the end of the debate over the over the financial reform bill. In other words, yes, this film makes changes the cup but which I don't like. But by the very fact that it doesn't change almost everything else, it's going to confirm them. Joining us is Robert Hockett, a

professor at Cornell University Law School. Bob, what's your reaction to what Barney Frank said about this bill being the end of the debate over the financial of over financial reform. H Well, thanks so much for having me on. So I'm gonna surprise you, uh, in one sense, I think and say that I actually kind of agree with Barney

Frank on this one. That being said, I do nevertheless think it's a good idea for the Senators, and I'm sorry the Dems in the Senate who object to the change to kind of keep sounding the alarm, because this is not the end of it, right. We now have Representative Henzerling's bill over in the House to be reconciled with this one, and that one is far more radical.

And so I think by kind of maintaining, you kind of holding the line as they are in the Senate, the progressive Dems there are i think, signaling that we won't go any fur. They're by way of retreat from God. Frank. Bob, what are the core changes in the Senate bill? Frank? Yeah, so, on the surface, um, you might say the optics are especially bad. On the surface, they look pretty extensive, But then when you look sort of underneath, they're not nearly

as bad as one might thought or expected. Again getting given to sort of control right in the in the house. So first of all, the old Siffy threshold of fifty billion has been raised to two hundred fifty. Now at first that sounds quite remarkable, right. It essentially releases about two thirds of the large banks from sort of fifty designation. Uh. And in that sense, you know, optically, that looks terrible.

They would have been a much better way to do this if you wanted to sort of differentiate between the mega banks and they're not so megabanks, you might have raised it to a hundred or hundred fifty or something. On the other hand, again, under the surface, things aren't quite as bad as they might look. Because the thing is, the Fed retains the discretion to regulate the banks that are under that new cify side size but still above tend above a two billion in the same way that

it has. It's just that it's not required by legislation to do so. So things might very well stay the same if the said makes prudent decisions about how best to regulate those sub dollar banks that are still over fifty billion dollar branks now shared Brown. Other senators, Progressive senators like Elizabeth Warren, have warned that these changes would harm consumers and increase risk in the financial system. Do you see that from this particular bill, Well, they certainly

opened the door to that possibility. Um. At the same time, however, possibility itself is probably a little bit remote at this point.

So take two examples, UM, some of the underwriting, some of the mortgage underwriting standards for banks under ten billion, the so called community banks have been sort of rendered a bit less stringent than they were made after that of course, sounds terrible on the surface and a end it's potentially dangerous, But there's a condition attached, um that actually some extats a significant extent and mitigates the risk.

And that is that that particular relief is only afforded the smaller banks if they're not selling on selling their mortgages off to securitizers or to g S e s. Right. In other words, UM, they enjoy that particular relief only if they are not in effect communicating their possibly risk your mortgages to the wider financial system. Now, of course it could still imperil those banks, but because they're smaller. When they're under ten billion, things look a little bit

less dangerous than you might initially have thought. So that's not to say that I endorsed the change. I'm just just I'm just saying that it's not quite as awful as one might have fraught or expected. Sort Of similarly with the Bulker rule. Right that the under ten billion, the so called community banks are getting relief from the so called Broker rule, and on the surface set doesn't

look very good either. Right. On the other hand of the backstory here is that the smaller community banks don't tend to do a lot of trading securities anyway, so it's not altogether clear that the Folker rule would have been making that much difference, Whereas the so called compliance costs to sort of documenting what you're doings to show that you're in compliance with Polker has been have been perhaps a bit higher for the lower I mean for the smaller banks at least as a proportion of their

total expenditures than they have to the larger banks. You mentioned House Financial Services Committee Chairman Jeb Hensling, who has said he wanted to include bigger revisions. Yeah, then we're passed by the Senate. What is he referring to? What has he had? What does he have in mind? Um, he thinks have quite a few things in mind, and in my view, almost all of them are are quite

irresponsible and indeed reckless. I mean, one case in point is, uh, he actually wants to give um a a sort of a regulatory pass to a number of very large private equity firms that sort of build themselves as so called business development companies. UM. So what they're essentially, what these firms do is they're basically private private equity firms that pretend to be doing and maybe sometimes actually far doing, um,

sort of venture capital type raising for small businesses. And then they say, oh, you know, we're being up the job creators and so forth. Um. But it's it's very easy to sort of say that you're doing that and nevertheless engage in very risky lending practice or risky investment practices.

And so it makes sense that firms like this would be overseen by the regulators, and the idea of just sort of letting them free, you know, sort of putting them loose of all regulations, simply onto the pretext that they are so called job creator business development companies. I think it's just again highly highly risky, I mean highly reckless. UM a lot of other things that ten really wants

to do as well. I think, at last last I checked, he wants to remove even the FED discretion to regulate the under two billion but above fifty billion dollar banks as cities. UM wants to sort of cut back, in other words, on the regulator's capacity to apply enhance potential regulations to banks when they aren't really freshly. We'll have to stop there and wait until he actually proposes these things and talk again. Thanks as always. That's Robert Howckett, Professor,

Cornell University Law School. Is the world's most popular weed killer. Toxic. More than seven hundred farmers, landscapers, and gardeners are suing Monsanto, claiming that exposure to the glypha sate in round Up gave them cancer. In a pre trial hearing, the San Francisco judge overseeing all three hundred of the federal cases against Monsanto said that the opinions of the experts testifying against Monsanto are quote shaky, potentially devastating development for the

cases getting to trial. Joining me is Jane Eggan, a professor at Widener University Delaware Law School. Gene first explained the basis of the lawsuits against Montsanto. What are they about, Well, essentially their toxic tort lawsuits. They're brought by various farmers, landscapers, gardeners against the company claiming that they developed cancer as

a result of being exposed to round up. During relatively long period of time, Federal Judge Vince Chabria heard about from about a dozen witnesses, including epidemiologist, toxicologist, statisticians, and an oncologist to decide who should be allowed to testify as experts before a jury. What was he looking for to make this determination, Well, essentially, this kind of hearing

is twofold UM. The first part that has to be decided first is whether the expert evidence of causation of one or both parties is admissible at trial under the rules of evidence, And because the plaintiffs have the burden of proof, their evidence is going to be the most key in the UH this initial stage. UH. Second, after determining that, the court will look at what the judge has seemed to be admissible evidence and determine whether there's a genuine issue of material fact that needs to go

to the fact finder. Uh. If, on the other hand, no reasonable jury could find for the plaint if, then the action will be dismissed. So the key to admissibility is essentially a two part test, which is that the scientific evidence that it forms the basis for the expert's testimony must be both reliable and relevant. Reliability essentially means that it's scientifically sound based on a reliable technique such

as epidemiology, which this is. But there can be other problems that are associated with reliability, such as what the Supreme Court has caused called an analytical gap between what the studies actually show and what the expert testifying for the party is concluding about it. And this seems to be one of the things that the judge is particularly

concerned about with regard to the plaintiff's evidence. In fact, as you suggested, he's telegraphed through his comments that he's skeptical of the plaintiff's expert evidence, but I think he's stopped short of saying that it is not admissible at least at this juncture, without knowing or looking into the evidence a little bit more closely. UM, because he has suggested that uh, he has correctly I correctly stated that it is not up to him to weigh this evidence

to decide whether roundup can cause cancer. It is rather up to him to decide what is reliable enough to get to the jury. So the toxicity of this herbicide has been debated by scientists worldwide for more than thirty years. What came out during this hearing to lead the judge to say that the evidence that glypha sate is currently

causing non Hodgkins lymphoma in human beings is pretty sparse. Well, I think the first thing is that the defendants are that Monfanto is relying on a relatively newly published study, very newly published study about agricultural workers that looked at fifty four thousand agricultural workers and uh stated or concluded that round up does not where glyphosate does not cause cancer. So I think there's the weight of that, But again, the court is not supposed to look at the weight

of it. Um he the judge, I think, was particularly concerned with the failure of the plaintiff's attorney to are the plaintiffs expert to actually account for confounding factors and the studies that the plaintiffs were relying on and these confounding factors were things like multiple pesticide exposures among the people who were tested. So I think that this this is really the first, very close and comprehensive look at

what we know about glycis sate. And I have to say it's really startling to me that after thirty years, we really know relatively little. And even the judge said, we don't know whether it causes cancer. Well, let me let me just ask you this because our reporter who has been covering the trial said the judge gave a strong indication that beat Rits, a public health professor at U c l A, maybe the only witness he allows to testify for the plaintiffs, and that even she's at

risk of being eliminated. Wouldn't that basically destroy the plaintiffs cases if they didn't have expert witnesses. Absolutely yes, and it probably would destroy the case. On a summary judgment motion to dismiss before trial, Uh, if if your evidence can't get in, if your plaintif your evidence can't get in, then mon Santo wins dismissal, which would have an enormous

impact on this litigation. This is a multi district litigation, which um is which means that all such cases in the federal courts against Montfanto for exposure to glife of faith have been transferred to this particular judge in the Northern District of California's So uh, if the judge determines the plaintiff's evidence can get in uh, the result would apply to all cases. And there's upwards of three seventy

cases here. Let's talk about the judges influence not only on these multi district cases, but thousands of other state court cases against Montsanto across the country. He was joined by a judge from Oakland who's handling hundreds of state claims, and he invited other judges across the US handling thousands more state court cases to make these proceedings part of

their record. So that's a lot of influence for one judge. Well, yes, and UH that's a good point, um that he is trying to make his hearing part of the record for all of those state proceedings around the country. But I think there's some procedural problems that are associated with that. Uh. You know, in each of those uh jurisdictions, the parties have a right to bring in their own experts, and a right to bring in their own evidence and may

their own arguments. And also, um, the rules of admissibility in some states are slightly different from the rules of admissibility of evidence in the federal courts. So I think there may be some problems with this, But I would applaud the judge, on the other hand, for trying to uh trying to uh make known what the issues are in the case. I'm not sure that it will have any direct influence on these other cases. However, as you

pointed out, it is likely to have an important indirect influence. UM. Also, do we have about a minute here, but can you explain how these often these product liability cases get settled before trial based on a few cases? Okay? Well, often they have these bell weather cases that go to trial, and they tend to be cases that are each representative of sort of a different category of of UH plaintiffs in the case, and it gives the parties an opportunity

to change what will happen. We're running out of town. I didn't give you enough time for that. That was that's a really long long question, Thank you so much. Though we learned a lot that's Gene Egg and professor at Widener University Delaware Law School. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Brosso. This is Bloomberg