Skip to main content

Four years after Dodd-Frank fix, system still broken

By Patrick McHenry
updated 1:49 PM EDT, Mon July 21, 2014
Four years after the Dodd-Frank Wall Street reform law's enactment, problems remain in the financial system, critics say.
Four years after the Dodd-Frank Wall Street reform law's enactment, problems remain in the financial system, critics say.
STORY HIGHLIGHTS
  • Rep. Patrick McHenry: Wall Street reform law isn't working four years after enactment
  • He says Dodd-Frank law has imposed billions in costs and millions of hours of extra work
  • McHenry argues it is another example of big government overreach

Editor's note: Rep. Patrick McHenry, a Republican, is in his fifth term representing North Carolina's 10th Congressional District. He was recently selected as chief deputy whip and also is on the House Financial Services Committee, where he is chairman of the Oversight and Investigations Subcommittee. The opinions expressed in this commentary are solely those of the author.

(CNN) -- In 2007 and 2008, the American economy suffered through its greatest crisis since the Great Depression. The Treasury Department estimates that from 2007 to 2009, the heart of the Great Recession, more than 8.8 million American jobs disappeared and more than $19 trillion in household wealth was lost.

In response to the crisis, the federal government took steps to reform our financial system, most significantly, passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Signed into law by President Barack Obama four years ago Monday, this bill was designed to improve accountability and transparency in our financial system, ensuring we never again face a financial crisis of this magnitude.

Regrettably, Dodd-Frank has done little to address the root causes of this crisis. Instead, by institutionalizing bailouts and undermining a competitive and fair marketplace, this law has joined Obamacare as another example of big government overreach that has ultimately done more harm than good for the American people.

Rep. Patrick McHenry
Rep. Patrick McHenry

Wall Street reform law only half done

At 849 pages, Dodd-Frank touches nearly every aspect of our financial system, from capital ratios of large financial institutions down to new rules on the credit cards most Americans have in their wallets.

Dodd-Frank has only grown larger since Obama signed it. Much of the statutory text tasks Washington bureaucrats with writing nearly 400 rules. As of the first of this month, law firm Davis Polk reported 45% of rulemaking deadlines have been missed.

Since its enactment, Dodd-Frank has imposed $21.8 billion in compliance costs while producing regulations that require nearly 60 million hours of paperwork with which to comply, according to estimates by the American Action Forum, a center-right policy institute.

Dodd-Frank and JPMorgan's losses

These compliance costs can be devastating to small community banks and credit unions. Often they are the only financial institutions serving small towns and rural areas such as those throughout my district in western North Carolina. Assuming these small institutions can withstand this Dodd-Frank-induced regulatory onslaught and stay in business, they will join larger banks in passing these added costs along to consumers, driving up the cost of borrowing and reducing access to much-needed credit.

Among the great indignities of the financial crisis: American families were footing the bill for the massive taxpayer-funded bailouts of Fannie Mae, Freddie Mac and other large financial institutions while struggling to scrape by in the broken economy. In 2009, Bloomberg estimated that the U.S. government and other federal agencies had committed nearly $13 trillion to support these failing institutions. The nearly $13 trillion represented 90% of the U.S. gross domestic product for 2008.

In signing the law, Obama claimed that never again would the American people foot the bill for these large firms. Yet amazingly Dodd-Frank does not just fail to end these bailouts, it cements them into law and greatly increases the likelihood the American people will be stuck with the federal government's bailout tab again in the future.

In addition to an alphabet soup of new agencies, such as FSOC (Financial Stability Oversight Council) and OFR (Office of Financial Research), Dodd-Frank also gave us the Consumer Financial Protection Bureau, a uniquely (some might say dangerously) unaccountable addition to our federal bureaucracy. Designed with the noble goal of consumer protection, the agency was given significant power to regulate financial offerings but was designed in a manner to leave it free of oversight from both the White House and Congress.

Among the agency's "accomplishments" is its qualified mortgage rule that has negatively affected credit availability in the mortgage market. The rule has especially harmed those who have typically struggled to access credit in the past, women and minorities. A recent report from the Federal Reserve Board showed roughly one-third of black and Hispanic borrowers would not qualify for mortgages under the rule.

Even more troubling is the bureau's latest project, the National Mortgage Database. In an apparent effort to make the National Security Agency jealous, this database will track individual Americans and their personally identifiable information, including the most intimate personal and financial details, going back as far as 30 years.

And this does not even begin to address the consumer agency's management failures that have led to claims of discrimination and retaliation against minority employees going unpunished and spending $216 million to renovate its rented office space.

Put simply, Dodd-Frank is but another failed big government "reform" -- just like Obamacare, the Troubled Asset Relief Program, or TARP, and the stimulus. When will this administration realize more government does not solve problems, it is the problem?

Read CNNOpinion's new Flipboard magazine

Follow us on Twitter @CNNOpinion.

Join us on Facebook.com/CNNOpinion.

ADVERTISEMENT
Part of complete coverage on
updated 9:42 PM EST, Fri December 19, 2014
Conservatives know easing the trade embargo with Cuba is good for America. They should just admit it, says Fareed Zakaria.
updated 8:12 PM EST, Fri December 19, 2014
We're a world away from Pakistan in geography, but not in sentiment, writes Donna Brazile.
updated 12:09 PM EST, Fri December 19, 2014
How about a world where we have murderers but no murders? The police still chase down criminals who commit murder, we have trials and justice is handed out...but no one dies.
updated 6:45 PM EST, Thu December 18, 2014
The U.S. must respond to North Korea's alleged hacking of Sony, says Christian Whiton. Failing to do so will only embolden it.
updated 4:34 PM EST, Fri December 19, 2014
President Obama has been flexing his executive muscles lately despite Democrat's losses, writes Gloria Borger
updated 2:51 PM EST, Thu December 18, 2014
Jeff Yang says the film industry's surrender will have lasting implications.
updated 4:13 PM EST, Thu December 18, 2014
Newt Gingrich: No one should underestimate the historic importance of the collapse of American defenses in the Sony Pictures attack.
updated 7:55 AM EST, Wed December 10, 2014
Dean Obeidallah asks how the genuine Stephen Colbert will do, compared to "Stephen Colbert"
updated 12:34 PM EST, Thu December 18, 2014
Some GOP politicians want drug tests for welfare recipients; Eric Liu says bailed-out execs should get equal treatment
updated 8:42 AM EST, Thu December 18, 2014
Louis Perez: Obama introduced a long-absent element of lucidity into U.S. policy on Cuba.
updated 12:40 PM EST, Tue December 16, 2014
The slaughter of more than 130 children by the Pakistani Taliban may prove as pivotal to Pakistan's security policy as the 9/11 attacks were for the U.S., says Peter Bergen.
updated 11:00 AM EST, Wed December 17, 2014
The Internet is an online extension of our own neighborhoods. It's time for us to take their protection just as seriously, says Arun Vishwanath.
updated 4:54 PM EST, Tue December 16, 2014
Gayle Lemmon says we must speak out for the right of children to education -- and peace
updated 5:23 AM EST, Wed December 17, 2014
Russia's economic woes just seem to be getting worse. How will President Vladimir Putin respond? Frida Ghitis gives her take.
updated 1:39 AM EST, Wed December 17, 2014
Australia has generally seen itself as detached from the threat of terrorism. The hostage incident this week may change that, writes Max Barry.
updated 3:20 PM EST, Fri December 12, 2014
Thomas Maier says the trove of letters the Kennedy family has tried to guard from public view gives insight into the Kennedy legacy and the history of era.
updated 9:56 AM EST, Mon December 15, 2014
Will Congress reform the CIA? It's probably best not to expect much from Washington. This is not the 1970s, and the chances for substantive reform are not good.
updated 4:01 PM EST, Mon December 15, 2014
From superstorms to droughts, not a week goes by without a major disruption somewhere in the U.S. But with the right planning, natural disasters don't have to be devastating.
updated 9:53 AM EST, Mon December 15, 2014
Would you rather be sexy or smart? Carol Costello says she hates this dumb question.
updated 5:53 PM EST, Sun December 14, 2014
A story about Pope Francis allegedly saying animals can go to heaven went viral late last week. The problem is that it wasn't true. Heidi Schlumpf looks at the discussion.
updated 10:50 AM EST, Sun December 14, 2014
Democratic leaders should wake up to the reality that the party's path to electoral power runs through the streets, where part of the party's base has been marching for months, says Errol Louis
updated 4:23 PM EST, Sat December 13, 2014
David Gergen: John Brennan deserves a national salute for his efforts to put the report about the CIA in perspective
updated 9:26 AM EST, Fri December 12, 2014
Anwar Sanders says that in some ways, cops and protesters are on the same side
updated 9:39 AM EST, Thu December 11, 2014
A view by Samir Naji, a Yemeni who was accused of serving in Osama bin Laden's security detail and imprisoned for nearly 13 years without charge in Guantanamo Bay
updated 12:38 PM EST, Sun December 14, 2014
S.E. Cupp asks: How much reality do you really want in your escapist TV fare?
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT