This month, the Dodd-Frank Wall Street Reform and Consumer Protection Act celebrated its fifth anniversary.  Former Congressman Barney Frank and Senator Chris Dodd, co-authors of the Dodd-Frank Act, are pleased with the Act after five years, claiming that “the average American is much better off than before the rules were added,” because “subprime mortgages can’t be made anymore.”  Frank also notes that the creation of the Consumer Financial Protection Bureau, which has returned more than $10 billion to more than 17 million consumers over the past five years, “has been a very good thing.” 

On the other hand, some critics are hoping this anniversary will be the Act’s last.  House Financial Services Committee Chairman Jeb Hensarling (RTexas) called the Dodd-Frank Act a “job-destroying” law in a recent address.  Hensarling refers to the Act as “Obamacare for our economy,” claiming that, although President Obama promised that the Act would “lift the economy” and “increase financial stability,” “Dodd-Frank has left us with fewer choices, higher costs and less freedom.” 

Fellow Texan Eric Sandberg, president and CEO of the Texas Bankers Association, also criticized the Dodd-Frank Act, claiming that the law has led to “the death of community banks while Wall Street’s ‘too big to fail’ banks continue to thrive.”  The result, according to Sandberg, is that 16.3 million individuals across the country “would have limited physical access to mainstream banking services” and will be left “without proper financial services.” 

So, what do these critics suggest that would revive the lending practices of community banks?  Sandberg describes a solution posed by FDIC Vice Chairman Thomas Hoenig: provide regulatory relief to banks that hold foreign exchange and interest rate derivatives worth less than $3 billion, maintain an equity-to-asset ratio of at least 10 percent, and don’t engage in trading activity.  Sandberg says this would allow community banks to “get back to helping their customers build their dreams.”   

We will continue to monitor this important debate.