Dodd-Frank was signed under False Reasoning, and now hurts Small Businesses. Here’s why.

The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in response to the 2008 Recession

In 2010, then-President Barack Obama passed the 800-page Dodd-Frank Wall Street Reform and Consumer Protection Act into law.

The bill branched off the belief that unregulated financial markets caused the Recession of 2008.

Proposed by Senator Christopher J. Dodd (D-CT) and Representative Barney Frank (D-MA) (hence the Dodd-Frank name), the bill attempts to avoid future recessions by regulating the “big” banks.

However, research from multiple institutions indicates that the 2008 Recession did not stem from an unregulated market, but instead from the government’s faulty housing policies.

The Act Regulates the Financial Market

The Dodd-Frank Wall Street Reform and Consumer Protection Act’s main purpose is to place major regulations on the financial sector.

The Financial Stability Oversight Council (FSOC) was created by this act, and “provides comprehensive monitoring of the stability of our nation’s financial system. The Council is charged with identifying risks to the financial stability of the United States; promoting market discipline; and responding to emerging risks to the stability of the United States’ financial system,” according to their website.

The council represents the “too big to fail” concept, as they identify the troubled big banks and bail them out with taxpayer dollars.

In addition, the Consumer Financial Protection Bureau was created as part of the bill to “aim to make consumer financial markets work for consumers, responsible providers, and the economy as a whole,” “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law,” according to their website.

The CFPB aims to protect consumers against unruly transactions, but it instead offers fewer choices for consumers and higher prices for credit.

The Act has helped “Big” banks – but hurts the small ones

By embodying the “too big to fail” concept, the Dodd-Frank Wall Street Reform and Consumer Protection Act has protected the big banks that support big businesses.

However, the bill has negatively affected the smaller businesses. The small banks – which mainly supply loans to smaller businesses – do not enjoy the same projections, and have therefore experienced very small growth since the Recession.

Since small businesses are a large part of the foundation of the United States’ economy, the growth of the US economy since the Recession has been the lowest since the 1960’s.

President Trump has been rolling back the Regulations

On Friday, February 3, 2017, President Donald Trump signed an executive order to roll back Obama-era regulations on banks.

This comes as no surprise considering President Trump’s opinion on the bill (he has called it a “disaster”).

However, his moves do not align with his anti-Wall Street sentiments during his campaign.

Instead of fighting against the big banks, the President worked with JP Morgan CEO Jaime Dimon and other big bank officials to roll back the regulations that have put more restrictions on the companies.

The Republican-led Congress is looking to end the majority of Regulations

On June 8, 2017, the GOP-led Congress will vote on a new bill that would roll back many of the regulations of the Dodd-Frank Act.

Called the Financial Choice Act, the Republican bill allows the President to fire members of the CFPB and allows Congress to completely defund the CFPB if they so wish.

The bill needs at least 218 votes to pass through the House, and many of the Republican leaders are counting on it passing.

It would then move onto the Senate, where Republicans would need to sway eight Democrats to pass the law. Democrats have been highly critical of the GOP’s bill.

Sources

CNBC – “Dodd-Frank Act: CNBC Explains”

Heritage Foundation – “The Dodd-Frank Act”

The Atlantic – “Trump Begins to Chip Away at Banking Regulations”

CNN Money – “House to vote on killing Dodd-Frank today”

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