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Log In / Register | May 22, 2018

Trump's Efforts to Dismantle Dodd-Frank Could Be Good for Small Business

Dodd-Frank, named after then-Senator Christopher Dodd (D-CT) and then-Congressman Barney Frank (D-MA), was signed into law by President Barack Obama on July 21, 2010. It was a reaction to the financial crisis of 2007-2008. President Donald Trump characterized it as "a disaster" during his campaign, vowing to repeal and replace it. Just two weeks into office, he took a major step in making good on his promise:

On Friday afternoon [February 3] he signed an executive order, which he said would dramatically scale back the Dodd Frank Act. "Today we are signing core principles for regulating the United States financial system," Trump said when signing the order. Earlier in the day, he said he expected "to be cutting a lot out of Dodd Frank." — Antoine Gara, Forbes

A brief statement of what Dodd-Frank is:

Dodd-Frank includes a range of 225 regulations, and sets up several new government agencies, including the Financial Stability Oversight Council and the Consumer Financial Protection Bureau (CFPB). The latter has since been tasked with preventing predatory mortgage lending. Meanwhile, Dodd-Frank’s key Volcker Rule restricts the ways big banks are allowed to invest and eliminates proprietary trading. — Nash Riggins, Small Business Trends

Why Dodd-Frank is controversial:

First and foremost, many economists have pointed out that while Dodd-Frank is supposed to protect the taxpayer by limiting the risks that financial firms are allowed to take, it also simultaneously decreases the ability of those businesses to turn a profit. In turn, critics argue that the strict regulatory burdens Dodd-Frank has introduced in terms of limiting how banks can invest has put a dent in America’s competitiveness as a premier global financial center. Others have similarly pointed out that such constraints have created a lack of liquidity that harms trading in bonds and securities. — Riggins, Small Business Trends

Dodd-Frank was a Democratic bill. Very few Republicans voted for it, but it appears that Democrats may agree that it negatively affects small business:

Trump may find bi-partisan support for regulatory relief on small and mid-sized banks. Bankers complain of expensive and unwieldy new burdens on these firms, which they say curtails lending to small businesses and local communities.

"While some targeted relief to community banks is appropriate, we cannot afford to undo Dodd Frank’s essential safeguards,” said U.S. Sen. Mark R. Warner (D-VA), a member of the Senate Banking Committee. — Gara, Forbes


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