BLOG VIEW: Last week was the first anniversary of the passage of the Dodd-Frank Act – or as it has become known in many corners of the industry, Frank-N-Dodd. The flippancy of that nickname is hardly an exaggeration, since the legislation runs an epic 2,300 pages. In comparison, the Penguin Classics edition of Leo Tolstoy's ‘War and Peace’ runs 1,472 pages.
The ‘Dodd’ half of the Dodd-Frank Act is no longer haunting Washington – former Sen. Chris Dodd went to Hollywood and is now the head of the Motion Picture Association of America. However, the ‘Frank’ half of the Dodd-Frank Act is still barreling his way around Congress, and he observed the anniversary of his epic legislative achievement the other week with a self-congratulatory appearance at the National Press Club.
‘There have been very few calls for any substantial amendment on the part of the financial services community,’ said Rep. Barney Frank, although he later acknowledged that more than few lenders were concerned about a teensy-weensy hiccup that goes by the initials ‘QRM.’ But Frank was stubborn in his insistence that the Dodd-Frank sledgehammer was the only way to solve the problems that brought down the U.S. economy.
‘It's disruptive because we had to disrupt a rotten system,’ Frank said. ‘We had to disrupt a system that collapsed.’
Well, this act of political homeopathy makes very little sense – you don't cure a disruptive system by replacing it with another disruptive system. It also doesn't help that the Dodd-Frank Act intentionally ignored the single most challenging problem facing the housing finance system: the fate of the government-sponsored enterprises.
In the year since the enactment of the Dodd-Frank Act, there has not been a renaissance in the financial services industry. If anything, there has been 12 months' worth of agitation, frustration, uncertainty and disappointment. The implementation of several of the key elements of the Dodd-Frank Act have been delayed due to the complexity of the legislation and the incompetence of those in charge of bringing the legislation to life – most notably, the debacle surrounding the launch of the Consumer Financial Protection Bureau, where it took nearly a year before the White House bothered to nominate a director.
There is also the case of the patient who is not eager to swallow its medicine. The Center for Responsive Politics recently reported that the financial services industry spent $117 million on the lobbying of Congress and the federal government during the first quarter of this year. Most of that money went into exerting pressure to either delay aspects of the Dodd-Frank Act or to get it repealed.
Most of the GOP leaders in the Republican-controlled House of Representatives have been happy to entertain the private sector's discontent over the Dodd-Frank Act. However, at least one voice of Republican moderation emerged, offering a different approach. Last week, Rep. Frank Lucas, R-Okla., chairman of the House Agriculture Committee, argued that Dodd-Frank needed to be fixed – but not thrown out.
‘The truth is that financial reform is not a black-and-white, support-or-repeal issue,’ Lucas said. ‘I think that rhetoric does more harm than good.’
Lucas added, ‘Any efforts to urge regulators to consider the economic costs of the new regulations is cast as an attack on Dodd-Frank, aimed at its repeal. Enough already.’
In a way, I am confused at how an intelligent man like Lucas wound up in Congress. His comments are a welcome change from Frank's chest-beating self-congratulations and the GOP leadership's chronic sneering at the legislation. Perhaps there is a middle ground, and the more onerous aspects of the Dodd-Frank Act can be repaired without creating yet another disruption. If such a possibility can be worked into reality, then hopefully the future anniversaries of the Dodd-Frank Act will be a lot happier than the first.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
