Many community banks are concerned that regulators such as the FDIC have become overzealous. But that is a product of the post-crisis environment and not a result of this law, which, by design, will help community banks continue to serve as a lifeline to small businesses.
3. Dodd-Frank failed to truly reform Wall Street.
The protests about the law emanating from Wall Street tell you all you need to know about this claim.
Dodd-Frank fundamentally transformed our financial system. It requires banks to keep more capital on hand as a buffer against bad loans. It establishes a process for unwinding firms if they fail — and prohibits the Federal Reserve from bailing them out. It brings more transparency and accountability to the $600 trillionderivatives market. It shuts down ineffective regulators and insists that the remaining ones share information to expose the next financial trouble spots. And it finally establishes a single agency whose mission is to protect consumers.
This all adds up to a systematic overhaul of a regulatory structure that hadn’t been sufficiently updated since the 1930s. Much still needs to be done to ensure that the law succeeds: Regulators must implement reforms aggressively, and Congress must continue to provide vigorous oversight. But Dodd-Frank is a comprehensive solution to a comprehensive problem.
4. Congress didn’t fix Fannie Mae and Freddie Mac.
There are two issues to address here: the financial problems at Fannie and Freddie, and the future of mortgage finance in America.
Congress addressed the first — not with Dodd-Frank, but before the crisis, when the George W. Bush administration asked us to take on the issue. I worked with Rep. Barney Frank (D-Mass.) and with Sen. Richard C. Shelby (R-Ala.) to pass bipartisan legislation creating a regulator with real teeth. That law gave the government the authority to put Fannie and Freddie into conservatorship, where they remain while Congress determines how to finance mortgages in the future.
Meanwhile, in Dodd-Frank, we took aim at the riskiest practices in the housing market. Unscrupulous lenders can no longer make loans to people who they know can’t pay them back. Brokers can’t steer borrowers to higher-rate loans in exchange for compensation from lenders. And those who sell risky securities must maintain a financial stake in their success.
The problems in our housing market — as well as the debate over the future roles of Fannie and Freddie — remain complex and contentious, but they have hardly been ignored.
5. It’s time to repeal Dodd-Frank.
Imagine legislation that authorizes regulators to prop up failing institutions; makes consumer protection an afterthought once again and allows predatory lenders and other unscrupulous brokers to take advantage of vulnerable Americans; lets Wall Street banks make risky bets backed by taxpayer money; allows hedge funds to trade derivatives in secret; and prevents regulators from getting the information they need to stop another meltdown before it happens.
That’s what repealing Dodd-Frank would do.
Whether or not you agree with the law’s provisions, repealing it would return us to a time in which nobody — not consumers, not regulators, not even other banks — knew what the Wall Street gamblers were doing until it was too late. It would destroy confidence in our markets and faith in our financial system, certainly hindering our recovery. It would again leave Americans at the mercy of those who have already ripped off too many families and businesses.
In short, repealing Dodd-Frank would invite disaster, putting working families, American businesses and the global economy at risk of an even worse meltdown.
Christopher J. Dodd , a Democratic former senator from Connecticut, served as chairman of the Senate Banking Committee from 2007 to 2010.
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