By Rob Abruzzese, Legal Editor
Brooklyn Daily Eagle
As President Donald Trump and congressional Republicans tried and failed to repeal and replace the Affordable Care Act last week, many in the financial sector were left wondering what the future of the Dodd-Frank act might be.
That’s the scenario that Brooklyn Law School’s “Legal Lunches” series examined last Thursday with professors Jim Fanto and Ted Janger — does Trump’s administration mean the end of the Dodd-Frank Wall Street Reform and Consumer Protection Act?
"I don't think we'll see Dodd-Frank repeal, that's just not going to happen," Janger said.
"We may see some targeted legislative action aimed at particular pieces of Dodd-Frank, but I don’t think there will be a large-scale repeal.”
Dodd-Frank was signed into law by former President Barack Obama in July 2010 as a response to the financial crisis of 2007-’08 that attempted to regulate some of the risky behavior that financial companies were participating in.
Two of the important things that Dodd-Frank has tried to accomplish including setting up the Consumer Financial Protection Bureau (CFPB) and created more strict rules for regulating how much money banks must keep on hand.
Trump has often criticized Dodd-Frank and began issuing executive orders in February designed to chip away at its teeth. An order he issued on Feb. 3 called for a 120-day review of ways the act can be amended. Changes could be troubling, the professors explained, even short of a full-blown repeal.
“Our large financial institutions have only gotten larger,” Fanto said. “Those are the ones that we were worried about. If one of them goes down, that's equal to 10-to-15 percent of our gross domestic product, and it's going to pull down the other ones down with them.”
Examples of the ways that Republicans could try to remove the teeth from the Dodd-Frank Act include simple changes to regulations — like the one passed by Republican senators on Feb. 2 that removed a rule that required oil companies to disclose payments for foreign governments.
The government could decide not to enforce certain regulations similarly to the way Republicans plan to handle the fiduciary rule, a rule created by the Labor Department meant to force retirement advisors to work in the best interests of their clients — and that is by not enforcing it come April 1 when it is supposed to take effect.
“It's in regulations — whether you propose more regulations, fewer regulations,” Fanto said. “All of that is going to come into play. [The fiduciary rule] is a good example. It's about to be enforced and then you say, ‘Delay it.’”
Fanto explained that some of this is natural, that under Obama regulations were high and pushback from the opposing party is normal. But he warned that financial institutions could begin to run amok if not kept in check.
“I think there were people, even in compliance, that said that the regulations were just too much and expected that the pendulum probably should swing back,” Fanto said. “We don't want it to swing to the point where people think that they can do anything. It makes you nervous when you see the CEOs of the top financial institutions say, 'Oh now we're welcome into the White House, they want to hear our views.'
“Of course, we want to hear your views, but we don't want to return to the time when they feel that they can do anything,” he continued. “There should be an at-arm's-length relationship. You don't want the pendulum to go too far.”