On Wednesday, the United States Senate voted to make drastic rollbacks to the Dodd-Frank Wall Street Public Reform Act, changing banking regulations set in the aftermath of the mid 2000s financial crisis.
The Senate approved the Economic Growth, Regulatory Relief and Consumer Protection Bill by a 67-31 vote. The bill loosens many of the regulations set by Dodd- Frank when it was passed in 2010,and cuts back on the amount of Dodd-Frank regulations applying to smaller community banks. Both Republican Mississippi Senators Thad Cochran and Roger Wicker voted in favor of the rollback.
Mississippi State University College of Business Associate Dean Kevin Rogers offered his take on the vote.
“Dodd-Frank was passed after the financial crisis, and it added additional oversight, regulation on banks after that crisis,” Rogers said. “It also tried to address some of the ‘too big to fail,’ which was impacting the larger banks. In trying to address those, they did a lot of across-the–board regulations that were more focused on the large banks, but were applied to all banks.”
Some of the regulations in Dodd-Frank limited the ways banks could invest and tightened and eliminated some of the ways banks could invest funds. One major component of the act, the Volcker Rule, eliminated proprietary trading, or the practice of a firm investing solely for its own gain.
The Senate bill would allow firms with less than $10 billion in assets to waive the ability to repay requirements from Dodd-Frank. The bill would also exempt the same banks from the Volcker Rule. In addition, it would lessen regulations for some public housing agencies, and require credit reporting agencies to provide credit-freeze alerts and includes consumer credit provisions for certain groups.
“It’s just some of the regulatory requirements that were put in to have kind of a safer, sounder system for the large banks, and that’s put a burden on the smaller banks,” Rogers said. “This should reduce some of the regulatory burden that they have.”
Rogers said he thought the regulations would be good for smaller banks.
“This is something that has been talked about really since Dodd-Frank, because some of the banks were just not as sort of unfairly treated in the new burden, and this is trying to rectify some of that impact of the initial law,” Rogers said.