The Lie Behind the Left’s Drive to Save Dodd-Frank

The Trump Administration’s initiative to reduce economic regulations includes talk of repealing the Dodd-Frank bank regulation bill dumped on the financial sector in response to the 2008 financial crisis. Predictably, the statists are circling the wagons to defend the law, engaging in the usual kinds of hysterical language and distortions Leftist politicians usually use whenever anyone suggests any reduction in taxes or regulations.

One aspect of the law in particular is a darling of the statists. The Consumer Financial Protection Bureau (CFPB) is of particular concern to the statist because of its enormous controlling power over banks. In a New Jersey Star-Ledger guest column, Trump's plan to kill consumer safeguards will be catastrophic to N.J.'s working families, Beverly Brown Ruggia, the Financial Justice Advocate for the “progressive” New Jersey Citizen Action (NJCA), charged . . .

Once again, House Republicans have taken up hatchet and torch with the intention of slashing and burning a crucial governmental institution meant to provide protections and safeguards for the wellbeing of all citizens.

The so-called "Choice Act" which, the House Committee on Financial Services Chair, Jeb Hensarling (R-Texas 5th Dist.) is eager to move through committee and to a vote, is to Dodd Frank and the Consumer Financial Protection Bureau (CFPB) what the AHCA is to the Affordable Care Act.

This legislation, which President Trump supports, would tear out the legal roots of the CFPB. If enacted, the bill would burn through the bureau's authority and independence to stop bad actors from breaking the law, leaving Wall Street banks and predatory lenders free to rip off consumers with impunity.

New Jersey is home to two members of the House Committee on Financial Services, Rep. Tom MacArthur (R-3rd Dist.) and Rep. Josh Gottheimer (D-5th Dist.), who are hearing this bill this week, have an obligation to the citizens of New Jersey to stop this bill in its tracks.

This destructive legislation proposed by House Republicans would gut the one entity that is holding Wall Street and financial institutions accountable for unfair, deceptive and abusive practices.

I left these comments, somewhat expanded and edited for clarity, with particular focus on the last sentence:

This destructive legislation proposed by House Republicans would gut the one entity that is holding Wall Street and financial institutions accountable for unfair, deceptive and abusive practices.

This is an outright lie. Laws against fraud and deception have long existed. Prosecutions following the 1999 accounting scandals involving Enron and other companies and their executives were based on laws that pre-existed even the Sarbanes-Oxley anti-fraud laws. The real deception is that Dodd-Frank was sold based on a deliberate mis-identification of the fundamental causes of the financial crisis and Great Recession.

The only institution capable of infecting the entire banking and financial system with bad lending is the federal government, through it massive regulatory labyrinth. And that’s exactly what happened. It started in the 1990s. The housing boom and bust, financial meltdown, and Great Recession were engineered from the Washington political establishment—a perfect storm of government intervention.

From the Fed to the FDIC, CRA, Fannie & Freddie and their implied federal mortgage guarantees, the legally protected rating agency cartel, FHA,  SEC, FASB accounting regulations, and on and on, the massive federal regulatory apparatus was geared to enforce the politicians’ affordable housing crusade. There is no way the “Wall Street and financial institutions” could have done this. Whatever financial firms acted badly—and many did, such as Angelo Mozilo’s

Countrywide and IndyMac Bank—private sector culpability was a derivative effect, not a primary cause.

The primary causes of the meltdown were government initiated, and have been well documented in books published by experts such as Thomas Sowell, John A. Allison, and Peter J. Wallison. Many articles have been written outlining the true nature and causes of the economic destruction, including “Free Markets Didn’t Create the Great Recession” by Don Watkins. But the statists refused to acknowledge their own primary culpability, and instead opted to shield themselves from blame, protect their own power, and expand their control over the economy—with the help of “progressive” hacks in the media such as the statists over at the NJCA.

We don’t need more protection from Wall Street and financial institutions. We need protection from our protectors—and to hold the real political culprits accountable, starting with Barney Frank, Chris Dodd, Alan Greenspan, Ben Bernanke, Franklin Raines, Bill Clinton, and George W. Bush. We need to ignore articles like this on, and go back to the proverbial drawing boards. Repeal Dodd-Frank. Get honest with Americans. And then enact, revise, or repeal laws that will actually prevent such politically engineered crises from ever happening again, while retaining long-standing fraud protections but otherwise liberating the financial business to do its job of providing capital, savings and investment opportunities, and consumer financing for entrepreneurs and so-called “working families”—i.e., productive people—alike.

Related Reading:

Finally, Some Positive Recognition for the Statists' Favorite Whipping Boy, Wall Street

Why No Wall Street Prosecutions? The Villains Are All In Washington

How Government Regulation is Corrupt by its Very Nature

Where Does Valid Law End and Regulation Begin?