Yesterday, the Senate passed the severely flawed Dodd-Frank financial regulation bill. Though the Obama administration has long promoted the bill as a signature agenda item, it’s clearly lost its luster politically and with the general public.
It’s not hard to see why. Speaking on the floor prior to the vote yesterday, Senate Republican Leader Mitch McConnell laid out some of the key flaws in the Dodd-Frank bill. “This bill grew out of a bill that was meant to rein in Wall Street, but which is now supported by some of Wall Street’s biggest banks and opposed by the small community banks in my state; a bill that’s meant to help the economy, but which is widely expected to stifle growth and kill more jobs in the middle of a deep recession, and a bill that, according to the papers, a vast majority of Americans don’t think will work.”
The New York Times reports today, “The legislation will be carried out mostly by the same federal workers who were on duty as the financial system collapsed. The new consumer bureau, for example, mostly will be staffed with employees transferred from the consumer divisions of the existing banking regulators, which have been excoriated by Congress and other critics for failing to protect borrowers from obvious and widespread abuses.”
Earlier this week, The Wall Street Journal editorialized on many of the problems with the bill: “[T]he biggest financial players aren’t being punished or reined in. The only certain result is that they are being summoned to a closer relationship with Washington in which the best lobbyists win, and smaller, younger firms almost always lose. New layers of regulation will deter lending at least in the near term, and they are sure to raise the cost of credit.”
Not only that, the NYT points out, “Even the bill’s political luster no longer seems certain. Despite public anger at Wall Street, the vast majority of Republicans opposed the bill with loud confidence, betting ahead of hotly contested midterm elections that the public dislikes government even more. Senator Richard Shelby, Republican of Alabama, described the bill as ‘a 2,300-page legislative monster.’ ‘It creates vast new bureaucracies with little accountability and seriously, I believe, undermines the competitiveness of the American economy,’ Mr. Shelby said on the Senate floor before the final vote. ‘Unfortunately, the bill does very little to make our system safer.’”
Americans seem to agree with this assessment of the Dodd-Frank bill. On Tuesday, Bloomberg News reported, “Almost four out of five Americans surveyed in a Bloomberg National Poll this month say they have just a little or no confidence that the measure being championed by congressional Democrats will prevent or significantly soften a future crisis. More than three-quarters say they don’t have much or any confidence the proposal will make their savings and financial assets more secure. A plurality — 47 percent — says the bill will do more to protect the financial industry than consumers.”
And all of this leaves aside the gaping hole in the bill: its complete failure to address the problems of Fannie Mae and Freddie Mac, the government-backed entities that helped spark the financial crisis with their irresponsible lending and politically influenced policies. Even Democrats have long been aware of this failure. Back in May, Sen. Mark Warner (D-VA) told CNBC, “I think it’s a fair claim to make that we haven’t done enough to fully address Fannie and Freddie. It is the big elephant in the room that hasn’t been addressed.” And yet Warner and almost every other Democrat eagerly voted to approve the Dodd-Frank bill.
As Sen. McConnell summed up yesterday, “So here’s a bill that fails to address the root causes of the kind of crisis it’s meant to prevent. This is a bill that creates a vast new and unaccountable bureaucracy that, if past experience is any guide, will lead to countless burdensome, unintended consequences for individuals and small businesses, that will constrict credit and stifle growth in the middle of the worst economic period in memory. But perhaps most distressing of all, this is a bill that punishes farmers, florists, doctors, retailers, and countless others across the country and far away from Wall Street who had absolutely nothing to do with the panic of 2008.
“In other words, once again, the administration and its Democrat allies in Congress have taken a crisis and used it, rather than solving it. How else do you explain the fact that a bill that was meant to address the excesses on Wall Street is expected to hit individuals and industries that had nothing to do with the crisis it was meant to prevent?”