Lawmakers celebrated the fourth anniversary of the Wall Street Reform and Consumer Protection Act of 2010, known as Dodd-Frank, with the release of dueling reports, one by Republicans and the other by Democrats.
The Republican report, written by House Financial Services Committee Chairman Jeb Hensarling, R-Texas, and Patrick McHenry, R-N.C., denounced the financial reform law for failing to eliminate “too big to fail,” the situation when banks are so large that their failure would destabilize the U.S. financial system.
In a statement accompanying Monday’s report, McHenry, chairman of the Oversight and Investigations Subcommittee, said, “rather than institute market discipline and a clear rules-based regime, four years later, Dodd-Frank’s failed policies have only worsened the risks within the financial system and recklessly handed financial regulators a blank check for taxpayer-funded bailouts.”
During the 2008 financial crisis, the Republican administration of George W. Bush, with the blessing of a Democratic Congress, created a $700 billion fund to bail out banks and other financial firms that were teetering on the brink of collapse. The move angered many who saw the government protecting the financial industry over taxpayers.
Under the new rules, the Federal Reserve has the power to break up a bank if it doesn't believe it can go bankrupt or be wound down without harming the overall financial system, said Alexis Goldstein, communications director of Other98.com, an activist consumer group.
"Dodd-Frank gives the regulators the tools they need to end 'too big to fail,' but thus far they have lacked the spine to use them," she said.
Republicans see the government's authority to wind down banks as a back door way to bail them out. They plan to introduce legislation “to repeal Dodd-Frank’s bailout fund,” Hensarling said.
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Copyright 2014 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.