Before the Senate had even managed to vote on final passage of the Dodd-Frank financial regulatory reform bill today (which it approved on a 60-39 vote), House Republican leaders were publicly promising to repeal it. “I think it ought to be repealed,” said House Minority Leader John Boehner (R-OH). “We hope [the Senate vote] falters so we can start over,” agreed Rep. Mike Pence (R-IN). “I think the reason you’re not hearing talk about efforts to repeal the permanent bailout authority is because the bill hasn’t passed yet.”
This isn’t a surprising development, as House Republicans have gone gangbusters with threats to repeal health care reform ever since it passed. However, much like repealing health care reform would remove protections like the ban on discriminating against customers with preexisting conditions, repealing the Dodd-Frank bill would send the country back to a status quo in which an unshackled Wall Street built up huge amounts of systemic risk, with the full knowledge that a taxpayer-funded bailout awaited their almost inevitable implosion. Here are some provisions of the Dodd-Frank that will become law with President Obama’s signature, but that the GOP is already set to repeal:
– Ability to unwind failed banks without bailouts: Republicans constantly demagogue the bailouts that occurred in 2008 to stabilize the financial system (though they occurred under a Republican administration), but repealing the Dodd-Frank bill would take away new tools granted to regulators to unwind failing firms without taxpayer dollars. This week, former Treasury Secretary Hank Paulson said he “would have loved to have” the bill’s authorities during the crisis of 2008.
— Bringing derivatives out of the dark: The $600 trillion derivatives market is almost entirely unregulated, and helped bring about the demise of some of the big financial institutions, most notably AIG, that needed to be rescued by the government. The Dodd-Frank bill puts these instruments onto public exchanges and through clearinghouses, giving the companies clear price information and regulators transparent paths to follow while policing abuse. It also prevents banks from engaging in some derivatives trading with federally insured dollars.
— Reining in risky trading: Courtesy of the Volcker rule — named after former Federal Reserve Chairman Paul Volcker — banks are prevented from trading for their own benefit with federally insured dollars. Such trading, which amounted to gambling with the government’s backing, sustained upward pressure on the housing bubble. Repealing this rule would be a sign to Wall Street that the casino is back open for business.
Repealing the bill would also mean disbanding the new Consumer Financial Protection Bureau, which fills a huge gap in the regulatory system that allows banks to run wild with predatory products while consumers have no advocate (and which Republicans have complained about so much that they probably would be all too happy to see it disappear).
Now, this bill is not perfect, and could have gone much farther in terms of breaking up the biggest banks or getting rid of risky trading entirely. But repealing it would simply let Wall Street banks right back into the wild, wild west that was created by years of deregulation and financial innovation that boosted bank profits but had no societal benefit.