Fixing the Democrats' Dodd-Frank Disaster
ObamaCare isn't the only legacy item up for repeal or renovation. The massive financial sector regulatory bill is on the block.
The financial crisis of 2008 is often characterized as a period when cold-hearted bankers took advantage of the American people by offering them mortgages they couldn’t afford. Furthermore, that narrative goes, the free-market system failed to protect the most vulnerable in our society from predatory lending.
In reality, we know Democrats from Jimmy Carter to Bill Clinton used the federal government to pressure banks by implementing and then revising the Community Reinvestment Act, designed to expand home ownership by offering sub-prime loans to those who didn’t even have to provide employment or income verification. The real predatory acts leading up to the financial crisis were made by Democrats in Congress who were willing to sink working class Americans in debt in order to empower government. Then, to ensure that government would be pulling the strings of the financial sector to an even greater degree, Democrats Barney Frank and Chris Dodd crafted financial “reform” legislation, the Democrat-controlled Congress rammed it through, and Democrat Barack Obama signed Dodd-Frank into law in 2009.
And then Democrats blamed George W. Bush for the 2008 financial crisis. Please.
The scope of Dodd-Frank reached far beyond addressing a simple problem, and it enabled the tentacles of government bureaucracy to touch just about every part of our financial system. In 2009, Obama wasn’t kidding when he said Dodd-Frank was a “sweeping overhaul of the United States financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.” It’s the same old Democrat playbook: Use government authority to create a problem, blame it on the private sector, and then implement a draconian government solution that exacerbates the problem.
Of course, Democrats are fine with the perception that they’re doing something to help hard-working Americans even if the end result actually makes it harder for people to pay their bills. For example, when Dodd-Frank capped the fees that banks can charge for debit card transactions, banks made up for this loss by limiting accounts with no fees, increasing monthly account maintenance fees, and increasing the minimum balances to open or maintain accounts. The result: more Americans without bank accounts.
Of former Senator Dodd and Representative Frank, the Washington Examiner writes that “given both of their roles in delaying reform before the crisis and then helping to shovel public money to Wall Street, it should not have surprised anyone that the bill they produced allows for permanent bailouts. Even worse, it’s a bailout mechanism without even the modicum of accountability that comes with having Congress to vote on each bailout.”
As with any federal government program, the supposed good intentions of politicians don’t necessarily translate into what’s good for the people or for the economy. And the negative impacts of Dodd-Frank on individual consumers, as well as on the national economy as a whole, highlight the need for Congress to take important steps to repeal the law.
But how would a repeal of Dodd-Frank help average Americans? Some of the benefits include more capital for banks to loan money to individuals and small businesses, more affordable banking options, and investment opportunities for community banks. In addition, less regulation of the financial sector would remove investment and capital roadblocks that consumers end up paying for in the end.
Fortunately, President Donald Trump is setting the right tone and is openly critical of Dodd-Frank. In early February of this year, the president signed an executive order directing the Treasury Department to conduct a review of the law, with the objective of developing reform proposals. And progress toward repealing Dodd-Frank appears to be moving forward at a reasonable clip. On Thursday, the Financial Services Committee passed the Financial CHOICE Act on a party-line vote.
In addition to reducing regulations placed on the financial sector by Dodd-Frank, The Hill reports, “The CHOICE Act would allow banks to opt out of Dodd-Frank if they hold enough cash, and it would limit federal stress tests of major banks to every two years. The bill would remove the power through which the federal government can label a bank ‘too big to fail,’ and disassemble it before it collapses and triggers another crisis. The act would replace Dodd-Frank’s Orderly Liquidation Authority with a special bankruptcy process that aims to insulate the financial markets from a failing bank’s fallout.”
What’s encouraging is that Republicans on the committee rejected measures by Democrats who wanted to keep some provisions of Dodd-Frank. The only area of agreement between the two parties is that small banks and credit unions need more relief to remain solvent. The emergence of this bill from committee is an important step toward a full repeal.
But don’t think Democrats are going to let Republicans dismantle another of Obama’s crowning achievements without a fight. Lisa Donner, executive director of a nonprofit organization called Americans for Financial Reform, said it would be “wrongheaded and a betrayal of Trump’s campaign promises to reign in Wall Street abuses.” The problem is that the financial crash of 2008 was originally an abuse of government power, not Wall Street power, followed by another abuse of government power with the implementation of Dodd-Frank.
Now President Trump and Republicans in Congress are moving us closer to dismantling Dodd-Frank and freeing the financial sector from oppressive regulations and manipulation by politicians. And the beneficiaries will be the economy, hard-working Americans and the Constitution.