Treasury Secretary Jack Lew said Thursday that the financial market’s resilience in the face of Britain’s vote to leave the European Union is proof that the Dodd-Frank financial reform law has “without question” made the banking system safer and sounder.
Britain’s vote caused a huge overnight spike in the dollar and sent stocks plummeting. But the market quickly bounced back, and Lew said that was “fresh evidence that Wall Street Reform is working and that with deeper capital, greater transparency and detailed resolution plans, it can withstand far greater shocks than before the crisis.”
Dodd-Frank was signed into law six years ago today, on June 21, 2010, and it reshaped the financial system. It imposed extensive new regulations on banks, created a new mechanism for the government to resolve failing banks, required new rules on derivatives, and implemented hundreds of new rules in different areas of finance.
It also created the Consumer Financial Protection Bureau, a new agency that Democrats were sure to highlight Thursday when they praised the law. Maxine Waters, the ranking Democrat on the House Financial Service Committee, noted that the bureau has returned nearly $12 billion to consumers from financial firms in the years it’s been in operation, and claimed that it has “been remarkably successful despite a concerted Republican assault on the agency.”
In the years since the law’s enactment, congressional Republicans have sought to make the case that it has crimped economic growth and made bailouts more likely, rather than less likely. On Thursday Jeb Hensarling, the Texas chairman of the House Financial Services Committee, again laid out the logic behind his criticisms of the law, calling it “a grave mistake Democrats inflicted upon the American people six years ago today.”
In establishing a mechanism for the government to take over and wind down failing banks, Hensarling said, the law created a “a taxpayer-funded bailout scheme,” and it has also hurt small banks and slowed growth through overregulation.
Hensarling and Republicans on the financial services panel have introduced legislation to provide an alternative to the law, one that would give banks the option of escaping Dodd-Frank regulations if they maintain much higher capital.
Donald Trump, the Republican presidential nominee, has said that he would repeal most of Dodd-Frank. Hillary Clinton supports the law and has proposed new regulations that go beyond the current rules.
