Every once in a great while an issue arises that seems to light a fire under political leaders. A case in point is that of the infamous Dodd-Frank legislation. There have been opponents of this bill for some time, but now it seems that some political leaders have had their fill of this version of financial reform. Recently, the Chair of the House Financial Services, Jeb Hensarling, told key members from the American Bankers Association that he “will not rest until Dodd-Frank is ripped out by its roots and tossed on the trash heap of history.” Hensarling went on to announce that his committee will be coming out with new legislation that seriously overhauls the Dodd-Frank Wall Street Reform and Consumer Protection Act in the very near future.
Hensarling did not offer a lot of detailed information, but he said that he is on a mission to give “vast regulatory relief” for banks that are able to meet simpler capital requirements. According to Jeb, the logic behind these changes are:
That if banks choose to keep fortress balance sheets to minimize risk and to protect taxpayers, they ought to have the right to do their jobs with minimal interference. That is the kind of logic that is difficult to argue with, no matter what your personal political beliefs or affiliation might be.
Any time this type of bill is announced, you can depend on it being contested. This bill is already being targeted and labeled as Dangerous. According to a statement from Democrat Maxine Walters from California:
“This is just another attempt by the majority to gut administration policies that have helped millions of Americans. Any plan that repeals the heart of Dodd-Frank is a futile exercise that could jumpstart another financial crisis.”
Getting rid of Dodd-Frank completely may very well lead the country back to a system that created the last great recession. Some may blame the last crash on deregulation, but the fact of the matter is that financial regulation was in place before the most recent recession and crash ever took place.
It is troubling, but the government has become more involved in financial industries for the past few decades. All of this involvement has led to increased financial instability. All of the steadily increasing regulation – which most definitely includes Dodd-Frank – has led to one of the longest periods of financial instability that this country has ever faced; the longest since the U.S. went through the Great Depression. There is no way to completely deregulate the financial sector, but bringing some common sense to Dodd-Frank by way of Hensarling’ s proposed changes may be just the shot in the arm that is needed to really get various financial industries firing on all cylinders once again.
A comprehensive plan and related legislation are surely in order at this point. The creation of the CFPB (which is essentially the physical embodiment of Dodd-Frank laws) has proved that this type of regulation can quickly get out of hand. This organization has nearly unlimited power, a budget that won’t stop and has been used to enforce personal grudges that the Obama administration has against various types of industries. However, in addition to reforming Dodd-Frank, the powers that be must also look at the financial regulation structure that existed long before Dodd-Frank and the CFPB. The old saying goes that you can’t fix one without fixing the other. And that should be a priority of Hensarling and his supporters as they get closer to potentially changing Dodd-Frank – and American financial regulation – for the better.
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