This spring marks the 10th anniversary of what became known as the Great Recession, America's slide into the 2008 financial crisis and the ensuing market crash. For many of us, it was a long, hard, five-year slog until things settled into something of a "new normal," one that has been characterized by slow and uneven economic growth.
Now, Congress is considering Senate Bill 2155, a meaningful modification to Dodd-Frank, the 2010 landmark legislation that brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression. Broadly, Dodd-Frank requires that banks hold more capital and gives regulators more power to punish lenders. This has forced banks to spend a lot more time and energy on regulatory compliance.
Many want fewer or no changes to Dodd-Frank, and others want more changes or a full repeal.
Like most, I believe good regulation is good for society. Good regulation enhances trust among, and protection of all, parties in the markets, it lowers transaction costs, and it allows goods and services to flow more easily to where they are wanted and needed. Bad, or over-, regulation does the opposite.
Like Sens. Tom Carper, Chris Coons, and Pat Toomey from our region, I support modifying Dodd-Frank. I believe the proposed changes greatly improve the existing legislation.
It's time, it's sensible and it's bipartisan.
It's time. Almost a decade has passed to allow for proper perspective, reflection, and analysis of the true causes of, contributors to, and potential mitigants of the Great Recession. We have also had enough time to evaluate the effects of many parts of Dodd-Frank and some of the unintended consequences of its implementation. The proposed modification to Dodd-Frank has been worked on thoughtfully for five years, with input from all sides, considering all those factors. It has not been done in haste, in the dark, in a shotgun fashion, or as political overreaction.
It's sensible. Admittedly over-simplifying the details of the amending legislation, it effectively accomplishes three things.
First, it more accurately defines which banks are systemically important, and it appropriately holds them to higher standards for the publicly allowed benefits of their greater size.
Second, it focuses potentially restrictive regulations on the very largest banks, while easing up on many of the regional banks, some of which complained that tighter rules were keeping them from lending. Few new banks have been started since Dodd-Frank. That's especially hard on underserved and remote communities.
Third, the proposed legislation allows banks to more easily and cost effectively make good residential mortgage loans supporting rational home ownership — which is a big part of the American Dream, the stability of our society, economic growth, and our overall well-being.
It's bipartisan. The draft legislation was sponsored by 15 Republican senators, 12 Democratic senators and one independent senator. It then passed the Senate by over a two-thirds majority, a margin historically seen as the benchmark for consensus, and a margin that hasn't been reached for major federal legislation in some time. While bipartisanship should never be the primary reason for supporting a piece of legislation, in the current environment it is worth encouraging, even applauding. Perhaps this will be the start of D's and R's reaching across the aisle for constructive compromise that nudges the country both forward and together.
No legislation is perfect. The original Dodd-Frank legislation was not. Former Rep. Barney Frank, who co-drafted Dodd-Frank, admits that and supports some limited change.
During the crisis and after, my bank was fortunate. We did not lay off associates, we continued to pay good living wages and benefits, and we actually increased hiring, office openings, philanthropy, volunteerism, investing, and lending to support our communities through an extremely difficult economic time.
This amending legislation will allow us and others to do even more of those good measures; and in doing so, move solidly past this uneven "new normal" to a safe and sound "better normal" for more Americans.