By Robert Weissman |
It was only a few years ago that our economy was hit by a financial crisis created by reckless behavior on Wall Street and a lack of consumer protection. It is shocking how quickly some in Washington have forgotten the painful consequences of inadequate regulation—though the millions of Americans who lost their jobs, homes, or retirement savings surely have not.
The Dodd-Frank Wall Street Reform and Consumer Protection Act created a sound regulatory foundation to protect consumers, rein in excessive risk taking on Wall Street, and put an end to "too-big-to-fail" bailouts. The idea that we should return to the rules that were in place before the financial crisis would be laughable if it were not being proposed by Republicans in Congress.
Repealing Dodd-Frank would eliminate the new Consumer Financial Protection Bureau, giving a free pass to the subprime mortgage lenders who duped millions of Americans into predatory loans that ended in foreclosure. Opponents of the new consumer agency are apparently more concerned with protecting their friends on Wall Street than protecting families buying homes, students borrowing for college, or servicemembers falling prey to financial scams.
Repealing Dodd-Frank would put the entire economy in danger, by taking away the financial regulators' ability to deal with future crises. Lehman Brothers and AIG demonstrated how dangerous the failure of a single financial firm can be to the larger economy—and thus big banks are now required to prepare plans showing how they can be dismantled in an orderly fashion. And if an individual firm does fail, it will not be rescued. Instead, the FDIC will wind it down safely and at no cost to the taxpayer. A repeal would let the banks off the hook, make another AIG bailout possible, and stick American taxpayers with the tab.
Critics say the Wall Street Reform Act is too expensive, but ignore the trillions of dollars our nation lost because of inadequate regulation. They claim, without a shred of evidence, that repealing the law would somehow create jobs, apparently having forgotten the millions of Americans who are still unemployed because the old rules weren't strong enough. Efforts to tear down Dodd-Frank and return to the failed policies of the past are misguided, irresponsible, and dangerous.
About Tim Johnson Chairman of the Senate Banking, Housing and Urban Affairs Committee
David John Fellow at the Heritage Foundation
Dean Baker Author of 'The End of Loser Liberalism: Making Markets Progressive'