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Half-A-Loaf Of Dodd-Frank Reform Is Better Than None | Stock News & Stock Market Analysis

Dodd-Frank: The Senate has voted to limit some of the Dodd-Frank financial reform’s worst rules that have led to small-bank closures, tight credit and more financial institutions deemed “too big to fail” than ever before. Good job, but it doesn’t go far enough.

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Yes, the reform was badly needed. It will take the federal government’s hand from around the neck of banks with less than $250 billion in assets — and especially those small, community banks with less than $10 billion in assets — to let them breathe a little bit.

The fact is, Dodd-Frank, which passed Congress in 2010 without a single Republican vote, imposed literally tens of thousands of new rules on banks, mainly small and midsize banks and financial institutions that had nothing to do with causing the 2007-08 financial crisis. These smaller banks had to go through expensive “stress tests” to see if they could survive market downturns, while also being required to hold more capital on their books and to report extensively on the income and demographic makeup of their borrowers.

And the bill will also exempt smaller banks from having to comply with the so-called “Volcker rule,” which keep banks from making profitable, but safe, investments with funds that haven’t been loaned out.

As National Review aptly notes, “Credit unions and local banks have been disappearing under the pressure, at a rate, according to government figures, of one per day since Dodd-Frank. This has led to a consolidation of the industry, eliminating competition and ultimately boosting the big banks all the more.”

This has led to less credit and higher banking fees for customers, and so the reform should be viewed as a big victory for Main Street America.

Amazingly, the Senate’s bill, which passed Wednesday by a 67-31 vote, was able to attract 17 Democratic votes, making it truly bipartisan, unlike the original Dodd-Frank law. Even former Rep. Barney Frank, who co-authored Dodd-Frank, called the changes proposed “mainly” reasonable in an appearance on CNBC.

But while we applaud the changes, they didn’t go far enough.

Last year, the House passed its own reform, the CHOICE Act. It went much farther toward dismantling Dodd-Frank entirely, which we believe would be best. For one, the Senate’s reform leaves Sen. Elizabeth Warren’s Consumer Financial Protection Bureau alive and kicking, even though the CFPB is anti-small business and leads to minorities and the poor having fewer financial options, not more.

But the political reality is it’s an election year, and the GOP wants to show it can play nice with Democrats.

“Half a loaf is better than none,” parents used to say, meaning basically, “take it or leave it.” This reform of Dodd-Frank is just that: Half a loaf of reform. We’ll take it.

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