Last week, Fox News’ Bret Baier reported that Congressional Republicans are trying to push through some “big changes to the financial regulations passed after the economic crisis of 2008.” (Skip ahead to the 21:25 mark.) He was referring, of course, to the Senate-passed Economic Growth, Regulatory Relief, and Consumer Protection Act.

Given what the bill actually does, the term “big changes” is a bit of stretch.

The House did pass a big-change bill – the Financial CHOICE Act. It would have repealed and replaced the core of Dodd-Frank. But the Senate refused to work with that bill, and delivered its own, tremendously watered-down version instead—one that fails to include even those reforms that passed the House with strong bipartisan support.

And Office of Management and Budget Director Mick Mulvaney’s recent House testimony indicates that the Trump administration is rejecting the House’s approach, too.

There’s no doubt that passing the Senate bill as is will be seen as a political victory for some, but Americans deserve better.

So, what’s the problem with the Senate bill? It’s mostly a bunch of carve-outs and exemptions from existing rules and regulations for smaller banks. It also relieves some larger bank holding companies from some of Dodd-Frank’s heightened regulations.

It does nothing, though, to address two core problems: (1) trying to maintain safety at commercial banks via more regulations and higher capital at the holding company level; and, (2) the enormous amount of discretion that regulators have to dictate exactly how banks can operate. In fact, the Senate bill expands regulatory discretion in key areas.

For instance, the bill implements a type of capital off-ramp for smaller banks, an innovative new approach that provides regulatory relief to banks that meet a higher leverage ratio. The Senate bill complicates this simple approach, though, because it leaves regulators with the discretion to disqualify banks for the otherwise promised regulatory relief even if they meet the higher ratio.

This type of discretion helps regulators and lobbyists, but it does little to provide clarity and certainty to the people actually running banks.

Furthermore, contrary to Speaker Ryan’s recent claim, this bill does not repeal one single title of Dodd-Frank.

Progressives such as Sen. Elizabeth Warren (D-Mass.) surely see this fact as a victory, but a quick look at what caused the crisis and what Dodd-Frank actually did to address those problems shows that Americans lose if Dodd-Frank stays intact.

The financial regulatory framework was in terrible shape prior to the crisis. Indeed, it created incentives that helped bring about the crisis. (No, deregulation did notcause the crisis.) Here are just a few of the main problems.

• The Basel capital rules. These rules—originally designed for internationally active banks but ultimately imposed on all banks—made it more profitable to hold mortgage-backed securities (MBS) than actual mortgages.
• Market Risk rules. In 1996, the Basel rules were tweaked so that banks had to incorporate market risks in their capital requirements.
• The Recourse Rule. In 2001, the capital rules were tweaked again, this time to give the same lower risk weights of Fannie/Freddie-backed MBS to highly-rated private label MBS.
• Bankruptcy rules. In 2005, the bankruptcy code was changed to include special exemptions (safe harbors) for derivatives and repurchase agreements (repos). These safe harbors from core bankruptcy provisions—such as the automatic stay and a ban on preferential transfers—gave derivative and repo users preferred positions relative to other types of creditors. These changes put users of key short-term funding vehicles at the front of the line in the event of bankruptcy, thus lowering their incentives to be careful.

Maybe all of this would have been fine in a vacuum, but it took place in a market economy full of people trying to earn money amidst all sorts of other policy changes. In particular, these changes coincided with President Clinton’s national homeownership strategy, a plan with the arbitrary goal of raising the U.S. homeownership rate to 70 percent through expanding Fannie and Freddie. (President George W. Bush basically kept it going.)

The rate had been stable for decades, and any federal policy based on raising it using higher consumer debt was destined to end badly.

As part of the plan, Congress forced Fannie and Freddie to finance fixed percentages of mortgages from clearly specified lower-income and underserved markets. They were also given the green light to buy sub-prime private label mortgage backed securities to meet those percentages. (Fannie and Freddie are still buying private label securities, even though they’re effectively part of the U.S. Treasury.)

In no way do these facts cast the blame for the crisis on lower-income people. There is simply no way to implement these types of lending policies without financing mortgages that are relatively riskier compared to those that met the previous standards.

What did Dodd-Frank do to address these regulatory issues? Pretty much nothing.

Proponents claim the law got tough on big banks and Wall Street, but those are the very groups that have been fighting to keep it intact. Community bankers supported the Financial CHOICE Act and the Senate’s new bill, and with good reason.

To be sure, a few Dodd-Frank sections address the mortgage market, but only indirectly. Congress could have set clear, tougher, mortgage standards, but it didn’t do that. Instead, Congress tasked regulatory agencies with developing new standards, knowing that the agencies would use their immense discretion.

Instead of ending up with a new tough standard for the secondary market (the qualified residential mortgage) and one for the primary market (the qualified mortgage or QM), there is only one standard: the QM. Worse, the Consumer Financial Protection Bureau decided to exempt any mortgage eligible for purchase by Fannie Mae or Freddie Mac from the QM standard, effectively ensuring the standard remains toothless.

Similarly, Congress failed to address directly any of the fraudulent practices that took place leading into the crisis. Instead, they added a new concept to consumer protection law – abusive practices – without defining it.

Fraud was already illegal, even in the mortgage market, so why not directly address any problems that allowed fraud to go on unchecked?

Instead of addressing known problems head on, Dodd-Frank enshrined – and even expanded – policies that create too-big-to-fail firms. Dodd-Frank is a boon to special interest lobbyists and regulators who exist to help people navigate complex rules and regulations.

It has only further socialized the cost of financial risk-taking and, therefore, increased the likelihood of future financial crises and bailouts. It protects Wall Street at the expense of Main Street.

There is no doubt that many small banks want the relief that the new Senate bill promises, but what happens to those banks when they grow into larger banks? Congress is not even close to repealing Dodd-Frank and replacing it with a properly incentivized regulatory framework. All of which is to say that Americans lose yet again.