The financial implosion that erupted in 2008 on Wall Street and ended up pushing the global economy to the brink of a disastrous rerun of the Great Depression rightly resulted in the Dodd-Frank Act. But now, with economy still choking on the aftermath of that calamity, and with barely a fourth of the required regulatory reform written — much less approved and implemented — Republican presidential aspirants are clamoring for the repeal of the badly needed banking regulatory reform.
Their irrational partisan stance against the reform bill, of course, mirrors the Republican Party’s early and long resistance to reining in the banking industry’s abusive trading practices. That position, in turn, clearly seeks to protect an industry that contributes heavily to their campaign funds.
Still, their pandering in pursuit of reversing the Dodd-Frank Act is startling. They are now saying, with a straight face, for example, that just the prospect of the full phase-in of the Dodd-Frank legislation amounts to government overreach and that it is harming “job creators” and “killing jobs.”
Good grief. Banks aren’t lending because unemployment from the banking crash remains high and consumers aren’t spending freely, so bankers aren’t sure what new developments will work in a cautious economy. That predictable dynamic has left banks more willing to sit on their cash than to make loans. But that’s not the fault of the Dodd-Frank reform.
The banking overhaul was written for good reasons, and it remains vital. The bill is designed to limit the sort of reckless lending (think toxic mortgages) and trading practices by banks that killed the economy. It aims to rein in highly leveraged, high-risk trading in complex derivatives, to require transparency and public listing of most trading in derivatives, and to protect consumers from financial fraud and abusive banking and credit card fees.