President-elect Donald Trump has vowed to dismantle Dodd-Frank, but a full repeal of the financial regulation law is unlikely without 60 votes in the Senate. Instead, the GOP might weaken the law without tearing it up. WSJ‘s Shelby Holliday reports.
The arrival of The Big Short in 2015 – available on streaming services now – and its subsequent nominations at the 88th Academy Awards, has reignited interest in the causes of the 2008 financial crisis.
The film would have you think that private greed on Wall Street and a lack of regulation caused the economic crash. While stories like this might make for a fun movie, The Big Short fails to align with the facts.
Learn more about the 2008 financial crisis in Peter’s book “Hidden in Plain Site: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again“
[VIDEO] Operation Choke Point Was Meant to Stop Fraud. So Why is the Program Going After Legitimate Business?Posted: September 6, 2015
The Government’s Secret War on Small Business
Banks are sending notices of account closure out to small businesses across the country, to clients they’ve done business with for years, even decades. The reason? They often don’t provide one.
But a growing number of business owners believe they know why they’re being cut off from the financial system. It’s Operation Choke Point, ostensibly an attempt to crack down on fraudulent businesses, but in reality a dragnet that has ensnared innocent entrepreneurs unfairly classified as “high-risk” players.
Earlier this year, Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg told Congress that Choke Point was over, but many business owners believe the FDIC and the Department of Justice have passed enforcement duties along to a newly created independent agency: the Consumer Financial Protection Bureau (CFPB), the brainchild of progressive senator Elizabeth Warren (D-Mass.). The CFPB operates under the guidance of the Federal Reserve and doesn’t rely on Congress for funding, which critics say allows it to operate without any meaningful checks on its power.
Reason TV profiled two business owners who believe they’ve been targets of Choke Point and its legacy: a payday lender in Southern California and a hookah seller in North Carolina. Brian Wise of the U.S. Consumer Coalition, an organization that’s been compiling Choke Point stories from across the nation, also appears in the video. Read the rest of this entry »
Before Dodd-Frank’s passage, former Sen. Chris Dodd said that ‘no one will know until this is actually in place how it works.’ Today we know.
House Financial Services Committee Chairman Jeb Hensarling writes: Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”
“What is most disturbing about Dodd-Frank is the authority it gives bureaucrats to control huge swaths of the economy.”
None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.
Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.
The law has crushed small banks, restricted access to credit, and planted the seeds of financial instability.
“Oversight? CFPB funding is not subject to congressional appropriations, and Dodd-Frank requires courts to grant the bureau deference regarding its interpretation of federal consumer-financial law.”
Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.
“Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s ‘Durbin amendment,’ which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.”
Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.
“Because of Dodd-Frank, financial markets will have less capacity to deal with shocks and are more likely to seize up in a panic. Many economists believe this could be the source of the next financial crisis.”
Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans. Read the rest of this entry »
Happy times are here again! Republicans have won the Senate, and they surely won’t screw it up this time. Right?Posted: November 9, 2014
The GOP Senate: A New Utopia Dawns
P.J. O’Rourke writes: Like all good Republicans, I’m so happy I could frack the moon. I could drone strike the Dodd-Frank Wall Street Reform and Consumer Protection Act, I’m flying that high. I’m feeling good enough to lay 1,179 miles of pipe with my honey-bunny Keystone XL. And now that the GOP has bedded the House andthe Senate, she is, ahem, about to come – delivering crude oil from Canada to the Gulf Coast and all the wetlands, wilderness areas, and sensitive eco-systems in between.
“Extraordinary things occurred the last time Republicans took legislative power away from a liberal quack…”
And that’s just the beginning of the wonderful events that are about to transpire. This is more exciting than the Newt Gingrich congressional triumph of 1994. Obama is a bigger sitting duck than Clinton. And Obama is a lame duck too. No Democratic Senate or House candidate was sitting in the voter blind with Hope and Change decoys on the electoral pond calling, “Barack! Barack! Barack!” Even the Dems ducked Obama.
“To sum those things up in just two words, which still stir the heart of every right-thinking member of the Grand Old Party: Monica Lewinsky. Was that fun or what?”
And there was the Contract with America, with its balanced budget and term limits Constitutional Amendments and its Personal Responsibility Act to discourage having children out of wedlock.
In 1993, 27 percent of American children were illegitimate. Now it’s, um, about 40 percent. But, come on, what kind of self-respecting Republican writes a contract that he can’t wiggle out of with the help of lawyers? And practically everyone in Congress is one. Read the rest of this entry »
Too Convoluted to Succeed
Nicole Gelinas writes: Five years ago this September, the Lehman Brothers investment bank collapsed. Markets around the world froze until Western governments devised a massive bailout plan that kept investors from pulling trillions out of the global financial system and precipitating a worldwide depression. The financial crisis helped propel Barack Obama to the presidency. In his inaugural address, Obama said that the crisis was a reminder that “without a watchful eye, the market can spin out of control.” After the February 2009 stimulus law and the March 2010 “Obamacare” health-insurance overhaul, the Dodd-Frank financial-reform act of July 2010—meant to sharpen the vision of that “watchful eye”—became Obama’s third signature legislative victory. “The American people will never again be asked to foot the bill for Wall Street’s mistakes,” Obama said as he signed the bill into law. “There will be no more tax-funded bailouts—period.” To applause, he added that “there will be new rules to make clear that no firm is somehow protected because it is ‘too big to fail.’ ”
But three years later, “too big to fail” lives on. “There’s a growing bipartisan consensus that the Dodd-Frank Act regrettably did not end the ‘too-big-to-fail’ phenomenon or its consequent bailouts,” Texas congressman Jeb Hensarling, head of the House financial-services committee, said just before Dodd-Frank’s third anniversary this summer. Republicans aren’t the only ones saying so. Elizabeth Warren, the new Democratic senator from Massachusetts, recently introduced her own “end too big to fail” bill, implicitly suggesting that Dodd-Frank did not fix the problem. At one congressional hearing after another, independent expert witnesses, as well as top officials from the Obama administration, have admitted that there is still no structure in place that would allow large financial institutions to go under without risking an economic meltdown. What went wrong with Dodd-Frank, and how can the problems be fixed? Read the rest of this entry »