One of the most sweeping financial regulations in recent history took a step closer to destruction on Thursday, as the House of Representatives voted almost along party lines to repeal the Dodd-Frank Act.
Part of the legislative package included a block of the DOL’s fiduciary rule set for implementation on Friday.
Dubbed the Financial CHOICE Act and sponsored by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, pundits say the legislation is nonetheless unlikely to move forward in the Senate, despite Thursday’s high-profile vote.
Originally passed in the wake of the 2008 housing and economic crisis to address what many felt were its root causes—including protections against systemic risk, curbs on speculative investing by large institutions and higher capital reserves—critics contended Dodd-Frank was over-burdensome and a drag on growth.
Surprisingly, one of Dodd-Franks biggest proponents, Barney Frank, for whom the law is named, agreed that a particular aspect of the legislation was in fact over-burdensome; it’s effect on small community banks.
“Anytime you pass a very complicated piece of legislation, you don’t get everything 100 percent right the first time,” Frank, former Democratic chairman of the House Financial Services Committee, told NPR.
Frank said his namesake financial reform law “has been too restrictive on smaller banks. He also believes the threshold used to identify other banks ‘as too big to fail’ should be higher,” according to the taxpayer funded news service.
“Beyond that what you have are Republicans—including the chairman of the committee, Mr. Hensarling, who is a very honorable, very pleasant, deeply, rigidly ideological conservative who is essentially against any regulation,” Frank added.
However, other Dodd-Frank proponents didn’t take the same “glass is half full” approach, especially with the fiduciary rule.
“Today’s passage of the Financial CHOICE Act is a terrible decision by the House of Representatives,” left-leaning think tank Economic Policy Institute said of the vote. “If it were to be passed by the Senate and become law, this bill would make future financial crises more likely and more damaging. It would strip away protections against American households being swindled again by the worst actors in the financial sector.”
Specifically, EPI added it would roll back the sorely needed fiduciary rule that requires financial advisors act in the best interest of their clients “rather than lining their pockets with the hard-earned savings of the people who turned to those very financial professionals for help with their retirement investments.”
It would also supposedly lead to a less transparent and less democratically accountable Federal Reserve, and “would mandate the Fed follow policy rules that would predictably lead to higher unemployment and less ability to fight deep recessions. It’s hard to imagine a bill that could do more broad-based damage to the future economic security of America’s working families.”