Breaking Down Dodd-Frank

  • February 07, 2017

The Dodd-Frank Wall Street Reform is the legislation that was enacted after the financial crisis to reduce predatory lending and regulate the banking industry.  On Friday, President Trump signed an executive order to reconsider post-financial crisis regulations, like Dodd-Frank.

Opponents of Dodd-Frank believe that forcing banks to hold more capital reduces their ability to lend.  Banks and other financial institutions have also had to spend substantially to comply with regulations.  Because of the investment they have already made, sometimes into the millions, big banks support amendment over total overhaul.  

In a meeting with his newly formed business advisory council, that includes executives like Mary Barra of GM and Elon Musk of Tesla, Trump said, “We expect to be cutting a lot out of Dodd-Frank.  Frankly, I have so many people, friends of mine, that have nice businesses that can't borrow money. They just can't get any money because the banks won't let them borrow because of rules and regulations in Dodd-Frank."

One of the products of Dodd-Frank was the Consumer Financial Protection Bureau (CFPB). The CFPB acts as an advocate for the consumer and works to prevent predatory lending and fraudulent activity.  Since its formation five years ago, the CFPB has returned approximately $12 billion to 27 million consumers who fell victim to financial schemes. 

At this time, no changes have been made.  The executive order that was signed directs the Secretary of the Treasury to report on recommended changes in 120 days.  Trump’s pick for Secretary of the Treasury, Steve Mnuchin is still pending a Senate-wide vote. 


Sources: Bloomberg, CNBC, Washington Post, US News and World Report

Cindy MacDonell
Senior Loan Officer
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Branch NMLS # 1270689

Cindy MacDonell

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