Just eight years after the financial crisis of 2008, Donald Trump and the Republican Congress’ victory in the 2016 election likely marks a substantial change in financial services regulatory policy, especially with regards to Dodd-Frank. This article will serve as the first in a multi-part series covering the Trump administration’s likely impact on the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

repeal-bill

The Trump Administration Vows to “Dismantle” Dodd-Frank

The Trump Transition Team has highlighted “dismantling” Dodd-Frank as one of its top priorities, arguing that the Dodd-Frank economy is ineffective because of bureaucratic red tape, and that Washington’s regulatory mandates are not the answer. The President-Elect’s Financial Services Policy Implementation team plans to work towards “dismantling” the Dodd-Frank Act and replacing it with new policies that they feel will encourage economic growth and job creation.

There has been considerable backlash to “dismantling” Dodd-Frank, especially from Democratic lawmakers. Various members of the Senate, including soon to be Senate Minority Leader Chuck Schumer[1] and Senator Elizabeth Warren,[2] have expressed vehement opposition to changes to Dodd-Frank due to concerns that deregulation could risk instability in the financial system, and the economy.[3] Meanwhile, Federal Reserve Chairwoman Janet Yellen[4] and the eponymous former Congressman Barney Frank,[5] have warned against a hasty and universal repeal of the law due to fears that the absence of Dodd-Frank’s protections would return the financial services industry to the conditions that preceded the 2008 recession.[6]

dodd-frank

Room for Collaboration

Despite opposition to changing Dodd-Frank, some Democrats may be willing to collaborate with Republican lawmakers on potential reforms. Senate Democrats like Sherrod Brown and Jon Tester have already voiced some willingness to work with House Republicans on changing Dodd-Frank. Even former Congressman Barney Frank has alluded to some flaws in the law that could potentially be changed.[7] However, with only 51 or 52 seats in the Senate, Republicans will have a difficult time securing the required 60 votes to cloture a potential Democratic filibuster, without taking substantial steps to reach across the aisle. Moreover, Senator Chuck Schumer is confident that he will be able to prevent a total repeal of the law stating that he has “60 votes to block [President Elect Trump.]”[8] This means that a total repeal of the law is unlikely and that President Elect Trump may have difficulty winning over Senators in his own party when attempting to change Dodd-Frank.

Moving Forward with Deregulation

Changing Dodd-Frank will certainly be a contentious process, but there are avenues available for Republicans to change the law and associated regulations irrespective of Democratic opposition. Hence, despite early rhetoric from both sides over the issue, the question is not whether Dodd-Frank will be altered — the question is in what ways will it be altered.

8of9 will continue to explore several core issues related to modifying the current Dodd-Frank regulatory landscape. Next week we will discuss the Financial CHOICE Act and its implications on legislative change.


Footnotes:

[1] http://www.cnbc.com/2016/11/21/repeal-dodd-frank-it-wont-be-easy-for-donald-trump-to-end-the-rule.html

[2] http://www.bloomberg.com/news/articles/2016-11-20/schumer-says-he-ll-fight-trump-tooth-and-nail-over-dodd-frank

[3] http://www.marketwatch.com/story/elizabeth-warren-says-shell-fight-trump-over-dismantling-dodd-frank-2016-11-10

[4] http://www.thefiscaltimes.com/2016/11/17/Yellen-Sends-Message-Trump-Hands-Dodd-Frank

[5] http://www.pressherald.com/2016/11/20/barney-frank-others-caution-about-hasty-repeal-of-dodd-frank/

[6] http://www.bostonmagazine.com/news/blog/2016/11/28/barney-frank-donald-trump-recession/

[7] http://www.bloomberg.com/news/articles/2016-11-20/schumer-says-he-ll-fight-trump-tooth-and-nail-over-dodd-frank

[8] http://www.politico.com/story/2016/11/elizabeth-warren-trump-transition-231412