During the debate over the Dodd-Frank financial reform law — which President Obama signed one year ago today — Republicans warned that the law would have a debilitating effect on the economy and undermine the “safety and soundness” of banks (code for cutting too deeply into their profits). But as the Los Angeles Times noted this week, banks “have been reporting billions of dollars in profits — including a record quarter for Wells Fargo & Co. — with nary a word about how the so-called Dodd-Frank financial reform law was hindering them”:
On Tuesday, Wells Fargo, the nation’s third-largest bank, posted record earnings of $3.9 billion for the second quarter. JPMorgan Chase & Co. reported last week that its revenue and profit were higher in the first half of this year than in the first six months last year, before Dodd-Frank was passed. Nor did the law seem to deter Goldman Sachs Group Inc., Bank of America Corp. and Citigroup Inc.
As Mother Jones’ Kevin Drum put it, “Dodd-Frank hasn’t taken full effect yet — nor have new capital requirements — but this is an ominous sign anyway. In the long run, if banks end up as profitable as they were before the law was passed, it almost certainly means that dangerous behavior really hasn’t been reined in significantly.” Indeed, several key regulations — including the Volcker rule, aimed at cutting down on risky trading — aren’t on the books yet, but there’s little reason to believe that the new rules will have any of the doomsday effects of which the banks were warning.
Even so, Republicans are doing everything they can do to undermine the law (while acknowledging that repeal is not in the cards with President Obama in the White House). Here are some of the main thrusts of their attack:
— Weaken the Consumer Protection Bureau: The House plans to vote today on a bill that would significantly weaken the Bureau (which Obama has vowed to veto). Senate Republicans have said they won’t confirm any bureau director until the structure of the bureau is changed to be more bank-friendly. The bureau officially opened for business today.
— Water down derivatives reform: House Agricultural Committee Chairman Frank Lucas (R-OK) plans to introduce legislation weakening the derivatives title of the laws, providing more exemptions from the law’s requirements that derivatives deals be transparent and cleared by regulators.
— Let banks keep passing on risk: One important provision of the bill requires lenders to hold onto a portion of loans that they make, so that they can’t divorce themselves entirely from loans with low standards. Republicans have tried to weaken this provision.
All in all, Dodd-Frank is still a work in progress, and Republicans are doing their best to slow that progress down as much as posible.