The Dodd-Frank financial law, brought to us by Senator Chris Dodd, D-CT and Rep. Barney Frank, D-MA, with promises of saving America from another financial crisis, is actually strangling the economy through new massive regulations. It represents a regulatory hijacking of the financial sector, spanning 2,300 pages delineating at least 400 separate rule makings by 11 different federal agencies. And, most of the provisions in the Act have little or no connection to the financial crisis that provided the excuse for its creation.
Lost your free checking? Thank Dodd and Frank! Did your bank inform you that in order to access your checking account you would have to have a debit card since they now only issue ATM cards for savings? Thank Dodd and Frank! Has your bank increased fees for services? Thank Dodd and Frank! Did you find out that mortgages and homes loan are harder to obtain? Thank Dodd and Frank!
Dodd-Frank did not end bailouts and taxpayer support for big banks. Under the Act, the Federal Deposit Insurance Corporation (FDIC) is permitted to purchase the assets of a failing bank, guarantee the obligations of a failing bank, take a security interest in the assets of a failing bank, and even borrow on the failed bank’s total consolidated assets. Just for Bank of America alone that would be $2 trillion in bailout authority with the tab being picked up by taxpayers.
Under the Act, 2,849 new regulatory jobs were created according to the GAO. It also created the bureaucracy of Consumer Financial Protection (CFPB) that has unlimited powers. While created to supposedly regulate credit and debit cards, mortgages, student loans, savings and checking accounts, etc, CFBP’s regulatory authority is only vaguely set in the Act. More than half of the regulatory provisions in Dodd-Frank state that agencies “may” issue rules or shall issue rules as they “determine are necessary and appropriate.” Which is pretty much the equivalent of letting a 6 year old determine what he will eat, what he will wear, whether or not he will go to school and when he will go to bed. Congress just pretty much let a bunch of newly unelected bureaucrats fix the economy as they see fit.
Because CFPB’s funding is set in statute as a proportion of the Federal Reserve budget, the bureau is not even subject to congressional control and effectively precludes presidential oversight.
As of July 2, 63% of the deadlines in the Act have been missed which only serves to intensify the cloud of uncertainty enveloping the financial sector and the economy. Thousands of businesses do not know what the government demands they do differently or when they need to do it, resulting in tighter credit, higher fees and fewer service innovations. Financial firms of all sizes are shelling out hundreds of millions for regulatory compliance officers and attorney rather than making loans for new homes and businesses.
Dodd-Frank will extract at least $27 billion in new fees and assessments on financial firms, according to the BCO. It will require more than 2.2 million labor hours annually to comply with the first 10% of rules issued. That is 56,516 work weeks!
The Act increased consumer costs for financial services. Mortgages and home loans will likely be much costlier, especially for moderate-income borrowers, because regulators are proposing unduly narrow criteria for “qualified” mortgages.
The so-called Volcker Rule within the Act effectively bars banks from investing their own funds and lower earnings will also increase consumer fees.
Dodd-Frank empowered the Federal Reserve to lower the fees that banks can charge retailers for processing debit card purchases which further prompts higher fees on other banking services.
Some rules contained in the Act will reduce liquidity in the market and thus inhibit innovation by limiting the amount of private capital available for investment.
Moody’s Investors Service recently cut the rating of 15 of the world’s biggest banks, in part because of looming regulatory burdens. Community bankers are restraining growth to remain below the asset threshold at which even more stringent Dodd-Frank rules kick in.
Once again, Congress jumped in with a massive overhaul of the financial sector without thinking any further than the end of their own nose. The law that they assured us would save America from further financial crisis is beginning to create a crisis of its own. Isn’t it high time Congress repealed Dodd-Frank?