House Republicans led a long, factually-challenged, and ultimately unsuccessful attempt to prevent the Dodd-Frank financial reform law from being enacted. But now that they have a majority in the House, they have been attacking the law on a variety of fronts, evidently content to have the financial system governed by the same regulatory structure that failed to prevent the 2008 financial crisis (but allowed banks to reap huge profits at the expense of the middle-class).
The first way in which House Republicans tried to undermine Dodd-Frank came during the budget process, when they simply refused to give two of the important federal regulators — the Securities and Exchange Commission and the Commodity Futures Trading Commission — funding to implement the law. The continuing resolution for the remainder of 2011 that was passed last week alleviated some (but nowhere close to all) of that pressure, as it included modest increases in funding for those two agencies.
But the GOP has not given up on trying to undermine Dodd-Frank. Here are three more ways in which House Republicans are trying to weaken the landmark law:
– REPEALING RESOLUTION AUTHORITY: The 2012 Republican budget that was approved last week (with no Democratic votes) aims to repeal a provision in Dodd-Frank that allows the Federal Deposit Insurance Corp. to unwind failing financial firms that, because they are so large and interconnected, can’t go through traditional bankruptcy. The FDIC recoups any costs incurred by selling off the assets of the company that was dissolved. The big bank lobbying groups — including the American Bankers Association and the Financial Services Roundtable — oppose resolution authority. Former Treasury Secretary Henry Paulson said he “would have loved to have” the resolution authority in Dodd-Frank.
– BLOCKING STRONGER REGULATIONS ON TOO-BIG-TO-FAIL BANKS: Dodd-Frank allows federal regulators to deem large, interconnected financial firms (banks or otherwise) as systemically significant and therefore subject to enhanced regulation (such as higher capital requirements). House Republicans want to remove this power, which, as CAP’s David Min pointed out, “would allow the largest U.S. financial institutions to essentially operate as they did before.”
– SLOW-WALKING DERIVATIVES REFORM: House Republicans introduced legislation that would push the implementation of new derivatives regulations back by 18 months “following financial-industry complaints.” These complex financial instruments were found by the Financial Crisis Inquiry Commission to be “at the center of the storm” in 2008. The legislation is tentatively scheduled for markup next month.
Any of these steps, if implemented, would accomplish House Financial Services Chairman Spencer Bachus’ goal of having Washington “serve the banks.”