President Trump has signed the biggest rollback of bank rules since the financial crisis in a major repeal of provisions of the Dodd-Frank legislation.
The new law eases restrictions on all but the largest banks, raising the threshold to $250 billion from $50 billion under which banks are deemed too important to the financial system to fail. Those institutions also would not have to undergo stress tests or submit so-called living wills, both safety valves designed to prevent or mitigate financial disaster.
Given the record-breaking revenues of the financial institutions and the strong recover from the financial meltdown, both at least in part attributable to Dodd-Frank, it is hard to see the necessity for repeal and no persuasive data in support was provided during the preparation of the legislation.
Congresswoman Carolyn B. Maloney (D-NY), Ranking Member of the Subcommittee on Capital Markets, Securities, and Investment on the House Committee on Financial Services issued a statement:
Ahead of the financial crisis – the worst recession in our nation’s history — predatory lenders saddled unsuspecting borrowers with toxic mortgages that they didn’t understand and couldn’t afford. Too often, these predatory lenders targeted communities of color — and when these toxic mortgages blew up, it devastated these communities.
In response, we passed the Dodd-Frank Act — and I had the privilege of serving on the Conference Committee. Dodd-Frank imposed tough new rules on mortgage lenders, and beefed up our efforts to crack down on lending discrimination. This bill would roll back some of these important protections.
The bill would undermine fair lending laws by exempting the majority of lenders from the new reporting requirements on lending discrimination. The bill would also weaken the protections for mobile home buyers — many of whom are low-income families — by allowing retailers of mobile homes to accept kick-backs in exchange for steering borrowers into predatory loans that they can’t afford — an egregious practice that Dodd-Frank outlawed.
And the list goes on.
This bill will have a disproportionate impact on communities of color and low-income Americans. And while it contains some provisions that every House Democrat has supported, the roll backs to Dodd Frank cannot be justified and I hope my colleagues will see the dangers that passing it would mean.
Phil Angelides, who chaired the commission that investigated the financial meltdown and proposed reforms included in Dodd-Frank issued a statement as well:
The passage today of legislation by the House of Representatives to roll back key financial reforms put in place in the wake of the 2008 financial crisis will once again put our nation’s financial system, economy, and taxpayers at significant risk. Today’s action, coupled with Trump’s embrace of financial deregulation and his appointment of regulators committed to the deregulatory agenda, will open the door to reckless risk taking on Wall Street to the detriment of families, businesses, and communities across the country.
It is particularly shameful that the House would pass this legislation on the 10th anniversary of the financial crisis that cost millions of Americans their jobs and their homes and wiped away trillions of dollars in household wealth, with all too many families and regions still struggling today from the fall-out of the crisis. Without any compelling public policy rationale – other than the deceptive guise of aiding regional and community banks – this legislation will put us on the road to re-creating the conditions of Wall Street excess and regulatory neglect that the Financial Crisis Inquiry Commission concluded led to the 2008 crisis.
Sadly, it appears that the more than $3 billion in campaign spending and lobbying by the financial industry since 2008 has paid off handsomely for the recidivist banks, at great cost to our nation. With Trump’s appointments in place and financial deregulation underway, the only missing ingredient for another crisis is Wall Street excess – as sure to come as the sun is to rise.
Billed as bi-partisan, the legislation was supported by Democrats who received large campaign contributions from the financial services industry.