Most Republicans and Democrats have a quite different take on Dodd-Frank. While the political right wants to dismantle the act, the left tries to protect it. Therefore, Dodd-Frank's fate depends mainly on the outcome of the 2016 election.
Democrats Dig in Against Attacks on Dodd-Frank; The Debate Has Become More Ideological
Compared with last year, fewer Democrats are voting for bills that weaken regulatory restrictions on banks and traders, says a POLITICO analysis. Furthermore, they are less likely to support measures that banks want Congress to pass. Last week, for example, Representative Maxine Waters (D-Calif.) threatened to rally Democrats against three bipartisan bills, which forced Republicans to pull them.
“Surprisingly to me, the financial services debate has, five years after the passage of Dodd-Frank, become less substantive and more ideological. It's harder therefore to do policy,” said Representative Jim Himes (D-Conn.), a former Goldman Sachs Vice President.
As a result of this shift, any easing of Dodd-Frank's rules becomes less likely in the near future. However, Republicans, bank lobbyists and also moderate Democrats argue that Dodd-Frank has to be adjusted in order to lessen the pressure on financial markets.
Wall Street Ramps Up a Huge Campaign Against Dodd-Frank
Although Dodd-Frank is not a topic that is widely discussed in public during the election campaigns, there is a lot going on behind the scenes. According to a report by Americans for Financial Reform, Wall Street banks and other financial institutions have so far reported spending more than $1.2 billion to influence decision-making in the current election cycle.
Obviously, the financial sector's spending strategy has an effect. The White House has already passed several legislation that delay key provisions of Dodd-Frank. Especially large banks want to be able to take more risk and they got the Republicans on their side to help them in that quest.
One of the primary targets of Dodd-Frank critics is the Volker Rule, which prohibits banks from conducting certain investment activities with their own accounts. After the repeal of Section 716, which forced banks to keep their derivatives business separated from their insured deposits, bank lobbyists are now working hard to get rid of the next big burden.
Dodd-Frank's Future Depends on the Outcome of the 2016 Election
Some politicians try to bring the issues to the public, such as for example Senator Elizabeth Warren from Massachusetts or Sherrod Brown from Ohio. Senator Warren, a vocal critic of Wall Street, has criticized Republicans more than once for their attempts to dismantle the act. Also Hilary Clinton defended Dodd-Frank and stated that “attacking financial reform is risky and wrong.”
Barney Frank said the forthcoming presidential election will determine the fate of the act, because he fears that the law will be repealed if the Republicans win. But even if the Democrats win, the future of Dodd-Frank will be uncertain. Wall Street will still have a huge impact on regulatory legislation and in the end they may have the upper hand in the discussion.
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