Last week it was widely reported that U.S. banks earned record profits. This is good. Without profitability, jobs and capital disappear.

Yet in some quarters inhabited by the political left, this was greeted as bad news, the unsavory result of Trumpian tax cuts and deregulation.

The reaction is not surprising. For nearly all of U.S. history, an anti-bank sentiment has stubbornly remained part of the popular culture, with conservatives frequently painted as favoring rich bankers over everyone else. Reality seldom intrudes in these discussions, especially when it comes to how regulated the banking sector was prior to the 2008 crisis.

The irony is that, if the banking industry were showing record losses, Democrats and Republicans alike would be tripping over themselves to simultaneously bash the banks and bail them out with taxpayer money because they are so important to the economy.

The proper response to the banks’ strong performance is to embrace it, along with the fact that some of the profit increase is due to the recent tax cuts. But we should also recognize that the tax cuts aren’t the only reason banks are doing well. As a Vox article reported:

Banks last year made a record $236.7 billion in profits, the Federal Deposit Insurance Corporation said on Thursday. Had the tax law not been enacted, banks still would have done well — the FDIC estimates they would have made $207.9 billion in 2018. But the law tacked an additional $28.8 billion onto their profits. In the fourth quarter alone, more than half of the increase in net income for banks came from the tax bill.

Even without the tax bill, times are good in the banking industry a decade after the Great Recession. Bank profits overall increased by $72.4 billion, or 44 percent, from their 2017 level.

As FDIC Chair Jelena McWilliams pointed out, “It is worth noting that the current economic expansion is the second-longest on record, and the nation’s banks are stronger as a result.”

The economy has been doing well and interest rates have been rising, driving both loan growth and profit margins. There’s no doubt that the tax cuts have helped, but that’s not a bad thing.

On the deregulation front, though, reality is a bit different from the prevailing spin. A Washington Post article claims that:

The industry’s growing profits could complicate its efforts to secure more regulatory relief from lawmakers and regulators during the second half of President Trump’s term. Congress has passed a sweeping rollback of regulations put in place after the crisis under the Dodd-Frank Act, and regulators have taken steps to offer additional relief.

There is no doubt that Congress provided some banks with regulatory relief in 2018, but it emphatically did not pass “a sweeping rollback of regulations.” Neither did the Trump administration. Not in any way.

As I wrote last March as the Senate’s bill (S. 2155) was heading toward passage, the bill “provides targeted exemptions from a few regulations for smaller banks, all of which will remain (heavily) regulated.” The bill did not repeal a single title of the Dodd-Frank Act, and the Trump administration can’t do something like that on its own.

Still, the myth of massive deregulation remains entrenched.

When the FDIC rolled out its Quarterly Banking Profile statistics, the Wall Street Journal’s Andrew Ackerman asked FDIC Chair McWilliams if there was any evidence that “the deregulatory moves” of S. 2155 (or steps taken by the Trump administration) have translated into higher profits at the banks. (Go to the 27 minute mark.)

McWilliams noted – correctly – that the FDIC is not engaged in deregulatory efforts. Instead, the Chair views what they’re doing as “finely tailoring” regulations. And, of course, all of the agencies are carrying out what Congress requires of them, so it simply cannot be the case that S. 2155 deregulated the banks but the FDIC (or any other agency) decided to ignore Congress.

Regardless, the banking agencies still haven’t finished writing the major rules for the tailoring that S. 2155 requires, so it is unlikely that any of the effects from the bill are showing up in 2018 profits.

Some of the most potentially impactful areas for regulatory relief are (1) the Volcker rule carve out; (2) the capital ratio election; and, (3) the qualified mortgage (QM) provision. (Don’t get me started on what S. 2155 did to the SIFI threshold.)

1. 2155 does provide some relief from the Dodd-Frank QM rule, but it does so by allowing banks with less than $10 billion in assets to hold mortgages on their books to automatically qualify those loans for QM status, provided they meet several other QM requirements. It is still unclear when the CFPB is going to issue a rule proposal or guidance, but S. 2155 did not get rid of the QM rule.

The capital election provision in S. 2155 allows banks with less than $10 billion in assets to opt into an ostensibly simplified capital requirement regime, provided their “risk profile” is satisfactory to regulators. But these rules are still out for comment, so it is unclear exactly what the new ratio will be and what sort of risk profile will be acceptable.

The controversial Volcker rule is another story.

The Federal Reserve is still writing the rules for the Volcker rule relief in S. 2155, and it is unclear exactly what S. 2155 does. Some on the Senate Banking Committee argue that the bill provides a Volcker Rule exemption for banks with assets less than $10 billion and with total trading assets and liabilities not exceeding more than 5 percent of their total assets. Others – including Rep. Blaine Luetkemeyer (R–Mo.) – believe that S. 2155 provides an exemption for all banks whose trading assets and liabilities do not exceed 5 percent of their assets.

The fact that it is so difficult to tell says volumes about how overly complicated banking legislation has become, but that’s another story.

The point here is twofold. First, banks have not yet been able to take advantage of the (potentially) most impactful components of S. 2155, even though the bill became law in May of 2018. Second, once banks can take advantage of these provisions of S. 2155, they will still have to abide by complex rules and regulations under the watchful eye of federal regulators.

There has been no deregulation of the banking industry, and the regulatory “tailoring” underway has been painfully slow. Americans are lucky that the banks have earned record profits, but they would be even luckier if the banks had earned more.