Business Review Board / April 14, 2016

Dodd-Frank Act Is Too Big and Failing

This Obama legacy seems to be falling apart.

It’s been six years since Barack Obama signed the Dodd-Frank Act — one of the most monstrous attempts at “reform” ever imposed on Wall Street. “These reforms represent the strongest consumer financial protections in history,” Obama said at the time he signed it. “And these protections will be enforced by a new consumer watchdog with just one job: looking out for people.” Well, certain people — namely Democrat constituents. But recently, this Obama legacy seems to be falling apart, and up and down, left and right, Americans are now ready to fix that onerous legislation.

The watchdog agency Obama created, the Consumer Financial Protection Bureau, is one of the least accountable bureaucracies in Washington. And it’s in federal appeals court this week, where a judge appears to think the whole bureau is unconstitutional. The CFPB was designed to be a fast-acting agency that can lay down regulation and demand compliance with rapid speed. It’s headed by a lone director who is not beholden to Congress because the bureau gets its money from the Federal Reserve. No accountability? Massively concentrated power? What could go wrong?

The House Financial Services committee passed two bills Wednesday that would place the responsibility to disperse CFPB’s budget in Congress’ hands. But that’s not the only part of the act that’s falling apart. This week, federal regulators declared five of the eight big banks were still too big to fail. They didn’t have adequate plans in place to declare bankruptcy and bring the U.S. economy down with them. Remember: Dodd-Frank was, in part, supposed to prevent the American public from bailing out the big banks again.

“Dodd-Frank’s failure on its own terms virtually guarantees that someone will reform it,” wrote the Wall Street Journal editorial board. “The question is whether it will be the judicial or legislative branch. Republicans have been criticizing Dodd-Frank since it was on the drafting table. More significant is that both Democratic presidential candidates are now also talking reform. Obviously a Bernie Sanders rewrite of financial rules would look very different from a Ted Cruz version. But outside of the White House, the status quo has almost no constituency. And with Barack Obama due to vacate the premises in just nine months, Dodd-Frank’s flaws are becoming impossible to ignore.”


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