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Partial Dodd-Frank Reform Is Good, Total Repeal Is Better

Dodd-Frank: The repeal of President Obama’s signature financial reform effort by a bipartisan 258-159 margin is a big victory for President Trump. But, while reformed, Dodd-Frank still lives.

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First, the bill is an improvement on the job-killing, business-strangling Dodd-Frank law.

A Democrat-dominated Congress passed it in 2010 with only a few Republican votes. The new law exerted unprecedented and sweeping controls over U.S. consumer financial markets — even though the consumer financial industry wasn’t implicated at all in the 2008-09 financial crisis.

The new law somewhat reduces Dodd-Frank’s role.

To begin with, it cuts the number of rules imposed on small banks and credit unions, who have been crushed by the cost of Obama-era financial rules, which favor the big banks.

It also makes it easier for banks to underwrite less-risky mortgages, as long as banks bear part of the risk. And it takes the government’s foot off the pedal of financial company onerous bank and financial company supervision, which cost billions but did little to make financial firms more stable.

Worse, it leaves the corrupt Consumer Financial Protection Bureau intact, while still giving the government power over Big Banks when they get into trouble.

In the end, what many had hoped would be the complete repeal of Dodd-Frank, became only a partial reform. It was entirely due to the way Congress works: Republicans wanted a much bigger reform bill, but Democrats wouldn’t go along.

So compromises were made by the GOP, yielding 33 moderate Democrat votes in the House and 16 in the Senate. Because the Senate requires at least 60 votes to pass most legislation without challenge on the floor, it was either compromise or there would be no bill. So Republicans compromised.

The Economist news magazine called the reforms “timid.” And former Rep. Barney Frank, whose name is on the Dodd-Frank law, acknowledged that legislation is now unlikely ever to be repealed in its entirety.

“The day that bill passes, that’s the end of any significant legislation on Dodd-Frank,” he said. “If the Democrats have the House, there will be no weakening whatsoever.”

This was all made possible due to the 2008 election, that swept an unassailable Democratic majority into power for two years, during which they passed two of the great legislative disasters in U.S. history: ObamaCare, and Dodd-Frank.

Elections have consequences, as President Obama said. One sad consequence of the 2008 election is that we are still living with two awful laws, one that did nothing to improve health care and the other that made our financial system materially worse and less stable.

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