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http://www.forbes.com/sites/stevedenning/2014/12/12/with-dodd-frank-rollback-the-big-bad-banks-are-back/

So I know this happened a little while ago, but I was waiting to see if anyone would post a thread about it explaining it a little for me. No one did, so I went and read up about it a tiny bit.

It seems what happened was that in passing the budget, Republicans tagged on a whole bunch of fairly egregious crap. And one of the things they did was to partially rollback a law which had been made to curb the excesses of Wall Street to try and prevent another crash. At the same time, they upped the amount of money individuals can contribute to campaigns significantly.

Now, I know that here on Dakka we've got a lot of disillusioned people who don't really support either party, and we've got a few hard core followers of either side. But I would love for anyone to explain to me how this is not a completely outrageous and undemocratic piece of crap legislation? Without saying "Well, the other side did X!", because honestly, this is just beyond the Pale. If I were american, I'd be furious about it. As a foreigner, I'm almost in awe of the sheer balls of both Wall Street and the Republicans. They must think the american people are total morons!

 Da Boss wrote:
http://www.forbes.com/sites/stevedenning/2014/12/12/with-dodd-frank-rollback-the-big-bad-banks-are-back/

So I know this happened a little while ago, but I was waiting to see if anyone would post a thread about it explaining it a little for me. No one did, so I went and read up about it a tiny bit.

It seems what happened was that in passing the budget, Republicans tagged on a whole bunch of fairly egregious crap. And one of the things they did was to partially rollback a law which had been made to curb the excesses of Wall Street to try and prevent another crash. At the same time, they upped the amount of money individuals can contribute to campaigns significantly.

Now, I know that here on Dakka we've got a lot of disillusioned people who don't really support either party, and we've got a few hard core followers of either side. But I would love for anyone to explain to me how this is not a completely outrageous and undemocratic piece of crap legislation? Without saying "Well, the other side did X!", because honestly, this is just beyond the Pale. If I were american, I'd be furious about it. As a foreigner, I'm almost in awe of the sheer balls of both Wall Street and the Republicans. They must think the american people are total morons!

I don't recall a lot about it, but if Frank was involved with it, I doubt it had a lot to do with keeping banks in check. He was pretty involved in stonewalling that type of stuff if I remember things right.

From my very crude understanding (which I am hoping some more savy posters can clarify for me) the law was intended to prevent financiers gambling with taxpayer insured money- essentially, getting the benefits if their gambles paid off, while knowing the taxpayer would foot the bill if it failed.

I think I might be wrong though, but that's what the Forbes article suggested. Sources I had read in Irish media had a similar interpretation.

 Da Boss wrote:
From my very crude understanding (which I am hoping some more savy posters can clarify for me) the law was intended to prevent financiers gambling with taxpayer insured money- essentially, getting the benefits if their gambles paid off, while knowing the taxpayer would foot the bill if it failed.

I think I might be wrong though, but that's what the Forbes article suggested. Sources I had read in Irish media had a similar interpretation.

That tracks pretty solidly with what I understand of it, though I must admit that my understanding isn't what I would call "expert" level.

Dodd Frank is garbage.

 cincydooley wrote:
Dodd Frank is garbage.

Could you expand on that?

I will when I get on my PC; driving back from a long ass wresting tournament presently

Ass wrestling, that's new.

It's one of the few laws that brings together conservatives and liberals in opposition to this gak law.

It's the genesis of the Too Big to Fail mindset.

Care to elaborate? Because I can't see how letting banks gamble with insured money does anything other than encourage that mindset.

Edit: To clarify- and if I'm totally wrong about that, I would like to know.

Yeah, for those saying this bill was dog crap, please explain why. I'm completely ignorant on it, would like the knowledge.

If I recall, the reason no one cared was because these changes won't be too impact full . I mean Dodd Frank didn't have that strong of teeth to start with. The campaign thing might not matter at all in the age of super pacts. I mean you can already spend all the money you want in secret super packs. In a way a allowing people to donate more might just result in more donations being known.

 djones520 wrote:
Yeah, for those saying this bill was dog crap, please explain why. I'm completely ignorant on it, would like the knowledge.

Okay, so I'm finally home. What was supposed to end at around 330 Didn't end until almost 730. Woohoo.

So...I'll just break down a few points from my perspective, and I'll preface it with saying that, as a member of the banking industry, I am absolutely biased. With that in mind, I'll start with the "general" issues with it:

1. It was a completely partisan piece of legislature. Not a single Republican signed it. IMO, any partisan legislature is bad, because I believe the only good legislature we get comes from mediation and cooperation from both parties. It so rarely happens that we're not used to it, sadly, but I think 100% partisan legislature of any kind is bad for our country.

2. It's like, 2500 pages long and is incredibly convoluted, and much like the ACA, was admitted to not have been read by many people that passed it. It's extreme size has made it nearly impossible to implement; IIRC about 50% of the deadlines for regulatory enactment have been missed.

And now onto the portions that really impact what I do on the daily, and the ones with which I've worked first hand:

1. The regulatory impacts to the industry have been enormous, and have no end in sight at the act doesn't set any boundaries or thresholds for regulatory power. It also means that regulators, especially at the beginning, haven't really had any idea what they're supposed to be doing, and in turn has resulted in an overextended trial and error process for banks in terms of what they can and cannot do. As a result, many institutions have been unwilling to take any risks, which are often the things that drive economic growth within the industry.

2. The act itself was a direct result of the loosening of lending standards required by Fannie and Freddie (see: the government). Banks were basically forced to give subprime loans to get uncreditworthy people housing, and were then blamed for the bubble which the government actually created. In fact, something like 70% of the subprime loans causing the mortgage crisis were on the books of the US Government, not private lending firms.

3. The Volcker Rule, which is the part I think Da Boss is referring to, was created to solve a problem that the government can't prove exists: namely the trading of securities for private institutions' own accounts.

4. The dissolution of revenue creating programs within banks and the creation of increased oversight and compliance positions, which do not generate revenue. Saw this first hand when a good number of my friends were laid off due to the risks associated with one of our business lines.

Again, I'm incredibly biased here, but the Act, a knee jerk, convoluted, completely partisan piece of legislation, hasn't done anything to solve any problems. All it's done is displaced the blame from its rightful place (the US Goverment) all while expanding their regulatory control.

Also... Consider the "Orderly Liquidation Authority", under which the Treasury can petition a federal district court to seize any bank (or non-bank declared systemically important, ie like MetLife) that it deems a threat to financial stability. A judge would have to decide within 24 hours not to allow the seizure or it would be automatically approved. Liquidation would then proceed with no possibility of judicial review in accordance with arbitrary procedures that could treat similarly situated creditors differently at the whim of regulators.

Neither the company being liquidated nor the creditors would have access to any legal recourse, violating imo the due process clause.

And numerous other quasi-bureaucracies under that act that has extremely limited oversight and accountabilty.

 Da Boss wrote:
At the same time, they upped the amount of money individuals can contribute to campaigns significantly.

Citizens United and the McCutcheon case took care of that... Anything else is mere lip service compared to what those two cases did.

 cincydooley wrote:

 djones520 wrote:
Yeah, for those saying this bill was dog crap, please explain why. I'm completely ignorant on it, would like the knowledge.

Okay, so I'm finally home. What was supposed to end at around 330 Didn't end until almost 730. Woohoo.

So...I'll just break down a few points from my perspective, and I'll preface it with saying that, as a member of the banking industry, I am absolutely biased. With that in mind, I'll start with the "general" issues with it:

1. It was a completely partisan piece of legislature. Not a single Republican signed it. IMO, any partisan legislature is bad, because I believe the only good legislature we get comes from mediation and cooperation from both parties. It so rarely happens that we're not used to it, sadly, but I think 100% partisan legislature of any kind is bad for our country.

2. It's like, 2500 pages long and is incredibly convoluted, and much like the ACA, was admitted to not have been read by many people that passed it. It's extreme size has made it nearly impossible to implement; IIRC about 50% of the deadlines for regulatory enactment have been missed.

And now onto the portions that really impact what I do on the daily, and the ones with which I've worked first hand:

1. The regulatory impacts to the industry have been enormous, and have no end in sight at the act doesn't set any boundaries or thresholds for regulatory power. It also means that regulators, especially at the beginning, haven't really had any idea what they're supposed to be doing, and in turn has resulted in an overextended trial and error process for banks in terms of what they can and cannot do. As a result, many institutions have been unwilling to take any risks, which are often the things that drive economic growth within the industry.

2. The act itself was a direct result of the loosening of lending standards required by Fannie and Freddie (see: the government). Banks were basically forced to give subprime loans to get uncreditworthy people housing, and were then blamed for the bubble which the government actually created. In fact, something like 70% of the subprime loans causing the mortgage crisis were on the books of the US Government, not private lending firms.

3. The Volcker Rule, which is the part I think Da Boss is referring to, was created to solve a problem that the government can't prove exists: namely the trading of securities for private institutions' own accounts.

4. The dissolution of revenue creating programs within banks and the creation of increased oversight and compliance positions, which do not generate revenue. Saw this first hand when a good number of my friends were laid off due to the risks associated with one of our business lines.

Again, I'm incredibly biased here, but the Act, a knee jerk, convoluted, completely partisan piece of legislation, hasn't done anything to solve any problems. All it's done is displaced the blame from its rightful place (the US Goverment) all while expanding their regulatory control.

Hmmm. Thanks very much for posting a detailed and well structured response!
Your initial two points seem like they are problems with the entire process of making bills in the US at the moment. I can totally accept them as problems, but I think I would prefer to measure laws on their merits rather than the way they are made.
Out of the other points, apologies, but it sounds a bit like an unregulated industry whining that they have to be regulated now. From my perspective (and I think the perspective of a lot of people), the financial sector was out of control a few years ago, and most of us would like it regulated. Considering the banks managed to tank the entire world economy, I'm not shedding any tears over bankers losing their jobs due to regulation to make banking safer.

The point that makes me question my assumptions is your point about the government's role in the banking crisis. I'm very well informed about the role of the government in Ireland's banking crisis, and it was significant, but a piece of legislation like this, had it existed in Ireland at the time, would have saved us the costliest bank bailout in history. But I am a lot less well informed about the role of the US government in lending, and have heard that it takes a fairly active role compared to what I am used to...

Any further points you feel like making, I would appreciate it, despite disagreeing with a lot of what you said there! (I'm open to my mind being changed, but I also have a pretty large bias in the opposite direction.)

To be fair a lot of governments - the US and UK included - have had a major hand in deregulation for the purpose of political shenanigans.

Labour wanted more de-regulation in order to increase tax and treasury receipts from house sales etc.

The same people demanding regulation are those that demanded de-regulation and the ability for holes in his pockets Harold to own his own home - no matter the cost. (who now want Harold to be frugal and yet spend on his dreams).

 Da Boss wrote:


The point that makes me question my assumptions is your point about the government's role in the banking crisis. I'm very well informed about the role of the government in Ireland's banking crisis, and it was significant, but a piece of legislation like this, had it existed in Ireland at the time, would have saved us the costliest bank bailout in history. But I am a lot less well informed about the role of the US government in lending, and have heard that it takes a fairly active role compared to what I am used to...

Any further points you feel like making, I would appreciate it, despite disagreeing with a lot of what you said there! (I'm open to my mind being changed, but I also have a pretty large bias in the opposite direction.)

1. Basically, US Government enacted de-regulation of lending led to the housing bubble as low-income, non creditworthy parties were required to receive lending, basically tossing credit risk tables out the window. The number of traditional home loans (fixed rate for 30 yrs) dropped significantly in favor of nontraditional loans like ARMs with zero-down payments, because these HAD TO BE GIVEN to the 'discriminated against" LIBs (low-income borrowers). Banks, now offering these to people that really weren't credit worthy to begin with, started offering these same loans to prime customers, creating situations where people had underwater mortgages as soon as the rates normalized and adjusted. This whole clusterfeth, in turn, screwed with how BASIL I functioned, as it devalued the mortgage portfolios and %s banks were required to cover.

2. As I said before, the US Government, via Fannie and Freddie, own upwards of 70% of the "bad loan" paper that caused the mortgage crisis. Not private banking institutions, as the media would have let you do believe.

3. And all this still ignores the fact that ADULTS took loans that they ended up underwater on at their own discretion. There has to be some accountability there as well. We could have gotten more house than we did when we purchases ours, but we didn't want an ARM, and we didn't want to be house poor. I have very little sympathy for those that consciously chose to take an ARM so they could 'afford' more house.

4. Its not "unregulated industry whining." If you want to discuss that, then we need to discuss all the smaller mortage firms like Countrywide Financial that Fannie and Freddie bought a large chunk of their paper from that have never been subject to the same regulatory scrutiny as the big banks. Or we can discuss the fact that the problem is that, as I already stated, that the new regulatory authority given to the CFPB is seemingly without boundary, especially as they were created outside the traditional framework of a regulatory agency.

Your "banks managed to tank the world economy" is, quite frankly, grossly misinformed, which is unsurprising because that's largely how the media presented it. I'm not saying the banking industry doesn't have some culpability, but the real problem is 'progressive" legislature like the Community Reinvestment Act that forced banks to lend to unqualified candidates because of, basically, affirmative action.

As I understand it the crisis arose because a bunch of gakky no-good US loans got bundled up into "financial instruments" that other banks bought because they were too stupid to know what they were doing.

When it all went down the pan, the tax payer was expected to carry the can on behalf of these privately owned companies.

That is from the UK perspective, of course. I have nothing to say about Fannie-Mae except that whatever law the US government may have passed compelling Fannie-Mae to offer bad loans it was not binding on Barclays, Lloyds, RBOS and so on.

Cincydooley, well said. Best synopsis of the 2008 crash I've seen. The media completely downplayed the effect of the CRA and the Democratic Party's unwillingness to see the train wreck that they created in the late 90s with progressive housing policies. I believe both Dodd and Frank were involved in successfully resisting attempts by Bush Jr. and Co. to reform the CRA as well as Freddie and Fanny's reckless lending policies in 04 and 05. Despite significant attempts by left leaning economists attempts to downplay the CRA effects on the crash, there is still ample proof that had it been reformed in 05 the crash would have been far less destructive. For those interested, the Wiki articles on this is a great place to start your own evaluation.

1/325AIR wrote:
Cincydooley, well said. Best synopsis of the 2008 crash I've seen. The media completely downplayed the effect of the CRA and the Democratic Party's unwillingness to see the train wreck that they created in the late 90s with progressive housing policies. I believe both Dodd and Frank were involved in successfully resisting attempts by Bush Jr. and Co. to reform the CRA as well as Freddie and Fanny's reckless lending policies in 04 and 05. Despite significant attempts by left leaning economists attempts to downplay the CRA effects on the crash, there is still ample proof that had it been reformed in 05 the crash would have been far less destructive. For those interested, the Wiki articles on this is a great place to start your own evaluation.

Except he got it a bit backwards.

The first problem was there was a lot of money floating around the world that needed a place to invest. Regular stocks and bonds weren't cutting it, so the Financial industry came up with this great new product where they would bundle mortgages together and play investor with them. Once these bundles were created and people started to get big returns on them, the demand for them went up.

As the demand for Mortgage backed securities increased, the banks needed more mortgages to bundle. Thankfully they were banks so they could set the lending guidelines and chrun out plenty of mortgages to back the new investment "du jour". As they created more and more mortgages to bundle, guess what; they had to use sketchier and sketchier loans. Of course, the American Dream has always been to buy a home, so everyone wanted to be part of the dream, can you blame them?

It was a classic bubble. Investors needed securities, Banks created a mortgage backed securities, Banks gave loans to people, People used loans to buy houses per the American Dream. It was basically the Tech and Tulip Bubble all over again after that. Once things started to go shaky and every Tom, Dick, and Harry thought they could invest in Houses one way or another the big money boys cashed in their influence to bail them out of their own reckless game.


Dodd- Frank was suppose to keep the Investment Banks seperate from the Consumer Banks. I'm sure banks hate it because it limits the pool of assets they can draw from. The essence of business is to use other people's money to reduce your risk of loss while you are trying to make big returns. Investment banks able to dip into Consumer accounts covered this to a Tee and allowed them to take bigger risks with their clients money. If they win, Bonuses all around! If they lose, Consumer accounts are backed by the FDIC. Investment bank accounts are not.

Granted, I'm no banker, but if I was I would put as much energy and effor tinto repealing Dodd-Frank anyway I could. Very few of them suffered any consequences fromt he old way of doing things, and many reaped huge rewards. I would want to go back too.

I mean, I respectfully disagree with nearly all of that.

I think I strayed off topic a bit by focusing more on the CRA, and your analysis, Easy- E has credit. Both the CRA and mortgage bundling predates by a long time the crash, and Dodd- Frank, in theory, should have prevented some of the risky lending. However, banks are usually risk averse institutions and banks are not going to churn out risky loans unless someone else was footing the loss-in this case the U.S. govt in the guise of Fanny and Freddie through laws like the CRA. I don' t think we can lay the crash at the hands of the banking community unless we look at those that fostered the behavior- again the progressive housing policies of the U.S. govt.
Well written responses Cincy and Easy. I don't think I can hang with either of your knowledge of the subject so I'll bow out and learn from any further responses you may have.

 cincydooley wrote:
I mean, I respectfully disagree with nearly all of that.

Despite my tone in the first post, it was probably a combination of both of our scenarios Cincy.

Investment banks trying to get some of that global Investment Money in a new way, Consumer Banks felt government pressure to provide mortgage loans, and a situation where everyone felt that they could not lose because of Government backing of loans, and Financiers down to ordinary Joes on the street felt that they would be an idiot not to take advantage of the current system.

This was a happy combination that allowed everything to "bubble" at the same time and eventually crash.

Edit: I also completely agree about the regulatory threshold thing you mentioned earlier. It seems pretty open ended.

 Easy E wrote:

 cincydooley wrote:
I mean, I respectfully disagree with nearly all of that.

Despite my tone in the first post, it was probably a combination of both of our scenarios Cincy.

Investment banks trying to get some of that global Investment Money in a new way, Consumer Banks felt government pressure to provide mortgage loans, and a situation where everyone felt that they could not lose because of Government backing of loans, and Financiers down to ordinary Joes on the street felt that they would be an idiot not to take advantage of the current system.

This was a happy combination that allowed everything to "bubble" at the same time and eventually crash.

Edit: I also completely agree about the regulatory threshold thing you mentioned earlier. It seems pretty open ended.

Yeah, when I posted that I meant to go edit it and rephrase, because it would be completely disingenuous of me to say that those factors didn't contribute. They absolutely did.

Again, as a completely biased party, it gets really frustrating when people don't realize all the other factors. It doesn't surprise me, because the news media at large and the Occupy Wall Street movement ignored all of those things, but it's still frustrating.

Again, I'm 100% biased about this, but yeah, there were a lot of factors that came into play for sure.

I still think there's a LOT wrong with Dodd Frank

 cincydooley wrote:

I still think there's a LOT wrong with all modern government legislation

Fixed that for you


It's slightly off topic, but it just seems to me that pretty much EVERYTHING that we see coming out of Washington that may potentially become a law, or does become law, is so chock full of shenanigans and extra BS that shouldn't be addressed that it's a wonder we're capable of doing anything anymore.

 Ensis Ferrae wrote:

 cincydooley wrote:

I still think there's a LOT wrong with all modern government legislation

Fixed that for you


It's slightly off topic, but it just seems to me that pretty much EVERYTHING that we see coming out of Washington that may potentially become a law, or does become law, is so chock full of shenanigans and extra BS that shouldn't be addressed that it's a wonder we're capable of doing anything anymore.

'Tis why we need some rule of some sort to only have ONE subject/dept per bill. So that there's more transparency in the process.