Five years after its passage, a new report has concluded that while the Dodd-Frank Wall Street Reform Act has been successful in the face of constant Republican attack, more must be done to ensure all Americans can benefit from our nation's recovery. The findings were announced today as part of a comprehensive report released by Democratic staff on the Financial Services Committee, at the direction of Ranking Member Maxine Waters (D-CA).
The report highlights the law’s accomplishments since its enactment in 2010, threats to full implementation and next steps in bridging the “recovery gap” for Americans left behind in the post-crisis economy. The report also details repeated Republican efforts to undermine the law, including Republican document requests that have forced regulators to produce over 23,000 pages of responses, reduced funding for Wall Street’s cops, and attempts to stall reform through numerous bills designed to weaken, delay, or repeal important components of the law. Some in the financial services industry have also sought to delay the law through the legal process, by filing at least 11 lawsuits, four of which led to the withdrawal or re-proposal of federal regulatory rules.
According to the report, and in spite of these attempts to undercut the law, Dodd-Frank has empowered regulators with vital tools to prevent a future crisis. And five years later, they have made significant progress, working to fully implement the law, monitor the financial system for risks to its health, finalize rules to help prevent future bailouts, increase transparency in the once-opaque derivatives market, rein in credit ratings agencies, and institute new investor protections.
“Five years and nearly 13 million jobs later, the Dodd-Frank Wall Street Reform Act has put our nation on a path to economic recovery. Today, our financial system is safer, more accountable, and more transparent,” said Congresswoman Waters. “The financial crisis represented the worst financial disaster in a generation. And in the face of relentless Republican attempts to roll back these critical reforms, Democrats remain committed to fighting to protect American consumers from the worst actors in our financial system.”
Among its more signature achievements, the establishment of the Consumer Financial Protection Bureau (CFPB) under Dodd-Frank has led to more than $10 billion in relief to 17 million Americans who’ve fallen victim to the same types of practices seen in the run-up to the 2008 crisis. As a critical source of protection for service members and consumers, the CFPB has also finalized rules that would both ensure that borrowers have the ability to repay home loans and that many of the tricks and traps seen during the subprime crisis are absent from those loan terms.
The 2008 financial crisis was the worst financial disaster since the Great Depression, inflicting wide-spread devastating costs on millions of American families. All told, nearly $13 trillion household wealth vanished, 11 million individuals were displaced from their homes, and nine million Americans lost their jobs. But the report finds that since the enactment of Dodd-Frank stabilized the financial system, the U.S. economy has rebounded, producing nearly 13 million jobs and cutting the unemployment rate by half.
“Dodd-Frank established critical tools to empower Wall Street cops on the beat, end the era of bank bailouts, and successfully launched the only federal agency dedicated to protecting the financial interest of American consumers,” Waters added. “Wall Street reform remains highly popular among the American people. It’s time for Republicans to acknowledge this fact and continue the real work of ensuring that all Americans benefit from our robust recovery.”
The report also provides a roadmap for regulators and Congress to “bridge the recovery gap” while also addressing small financial institution concerns. The report reads:
“Congress and regulators should work together to bridge the recovery gap. While the economy has rebounded significantly since the enactment of Dodd-Frank, some groups and communities have yet to fully benefit from the recovery. The wealth gap—the difference in wealth between high, middle and low-income households or between white and minority households— is currently at its widest level in 30 years. Middle-, lower-class, and minority families have seen their wealth stagnate. The recovery gap also includes small financial institutions. While bank failures have greatly slowed since Dodd-Frank, and the law and Democrats have provided numerous exemptions and exceptions for smaller financial institutions which have helped them to stabilize, small financial institutions could benefit from additional regulatory relief, as provided for in HR 2642, which all Committee Democrats have cosponsored. As Congress intended for Dodd-Frank to help struggling communities, bridging the recovery gap for these persons and institutions should be the next phase of reform.”
Full text of the report can be found here.
An executive summary of the report is here.