Tweaking Dodd-Frank Opens GOP to Charges of Favoritism
Last week, the House passed the Promoting Job Creation and Reducing Small Business Burdens Act (H.R. 37). The bill, essentially a package of previous House bills that had garnered strong bipartisan support, makes several small financial regulatory improvements. But this short-term strategy – making small tweaks to the existing regulatory framework – may not be the best approach for fixing what’s wrong with U.S. financial regulations.
The real problem is not, for instance, whether the Volcker rule requires banks to divest certain types of assets in 2015 or 2019. The real problem is the Volcker rule itself and, more broadly, the whole mass of regulations impacted by the Dodd-Frank Act.
The U.S. has a monstrous regulatory bureaucracy that tries to micro-manage every aspect of U.S. capital markets, and Congress needs to dismantle it. The current, small ball strategy could be the biggest roadblock to achieving that goal though as Democrats are already painting the most recent bill as a give-away to Wall Street. It’s hard to argue against that perception when the bill exempts certain collateralized loan obligations from the Volcker rule. Very few people outside of large financial firms even know what these are and, fairly or not, such actions reek of favoritism.
But everyone can understand that Dodd-Frank harms free enterprise because it inserts more layers of government regulation into the economy. Millions of Americans enjoy running their own business, but few enjoy having to answer to government regulators for every decision they make. That’s the basic problem with U.S. financial regulations and it’s why Dodd-Frank should be repealed.
The 114th Congress has a chance to shift its focus to bigger issues, such as repealing the Dodd-Frank Act and ending the too-big-to-fail problem. That is an opportunity they should not squander.