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The End of Dodd-Frank?

November 13, 2014 in Economics

By Mark A. Calabria

Mark A. Calabria

The results of the midterm elections, with Republicans increasing their House majority and capturing the Senate, seem like a repudiation of President Obama’s policies. After health care, the administration commonly lists financial reform, the Dodd-Frank Act, as one of its signature achievements. Do the election results signal the end of Dodd-Frank?

It’s worth noting that the coming Republican majorities in both houses and their committee leadership voted against Dodd-Frank. In the House, current Financial Services Committee Chairman Jeb Hensarling retains his leadership position, while in the Senate, my former employer, Sen. Richard C. Shelby, retakes his seat as chairman of the Banking, Housing and Urban Affairs Committee. Both have previously introduced measures to repeal Dodd-Frank and were leaders against its passage. It’s fair to say Dodd-Frank will not have any friends among the leadership of both the House and Senate majorities.

Mr. Shelby and Mr. Hensarling are also vocal opponents of bailouts. For Mr. Shelby it goes back to at least his 1979 vote (then as a House Democrat) against the first Chrysler bailout. Both were also leaders in their respective houses against the Troubled Asset Relief Program. Mr. Shelby famously walked out of a Bush White House meeting to denounce the plan in front of the press.

While full repeal of Dodd-Frank is unlikely, a number of modest changes are possible.”

While these two are no fans of Dodd-Frank, nor are they protectors of Wall Street. They share that Southern populist suspicion of both big finance and big government. Mr. Shelby went so far as voting for the Brown-Kaufman amendment to break up the banks, offered during Senate consideration of Dodd-Frank. Mr. Shelby was also one of the few Republicans to vote against Gramm-Leach-Bliley, which formally ended the separation of investment and commercial banking. My own experience interacting with Mr. Shelby and Mr. Hensarling is that you would be hard-pressed to find two members more opposed to the privatization of profits and socialization of losses that so characterizes our financial system.

Still, does any of this really spell the end of Dodd-Frank? Not likely. Most difficult of all for both Mr. Shelby and Mr. Hensarling is that many within their own caucuses, while opposing Dodd-Frank and happy to make marginal changes, are increasingly comfortable with the Wall Street view that it is simply time to move beyond additional changes to our financial system. Dodd-Frank is widely viewed on Wall Street as the “devil you know,” and while costly, is ultimately manageable. Of course, some of the worst elements of Dodd-Frank, such as the Consumer Financial Protection Bureau, do not even cover Wall Street.

It is also important to recall that …read more

Source: OP-EDS

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