March 2016 - RIP Dodd Frank

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TH E M R EP O RT | 17 COVER STORY AN UNCERTAIN FUTURE FOR WALL STREET'S TOP WATCHDOG What awaits the Consumer Financial Protection Bureau? Six years after its creation, the Consumer Financial Protection Bureau (CFPB) still remains, arguably, the most contested and con- troversial agency rolled out under the Dodd-Frank Act. With American consumers still reeling from the Great Recession, largely Democratic lawmakers wanted to balance the scales between Wall Street and consumers—and they got it. Today, the CFPB pursues cases and penalties against banks, credit unions, nonbank payday lenders, and mortgage servicers for shady behavior and violations of the law. Those who support the bureau say it polices Wall Street. And those who oppose it? They fall along largely partisan lines, too, with Republicans vowing—and trying repeatedly—to dismantle the CFPB. What seems to rankle G.O.P. lawmakers most is the agency's ex - clusion from the typical appropriations process for federal agencies. Like the FDIC, Office of the Comptroller of the Currency, and other agencies, the CFPB is budgeted through someone else—in its case, the Federal Reserve—instead of through Congress. "Just like these agencies, it doesn't go through the congressional appropriations process," said Michael Barr, a law professor at the University of Michigan Law School who helped pass Dodd-Frank as Treasury assistant secretary. "It's designed to insulate these federal of - ficers from political pressure from Congress and police the market." That didn't stop a Republican-controlled Congress from refusing to appoint a CFPB director in the agency's early years. Ultimately, President Barack Obama sidestepped lawmakers with a recess appoint- ment that made Richard Cordray the agency's first director. Still to be seen? Whether any of the same Oval Office maneuvers could protect the CFPB—or Dodd-Frank. floor of accountants to fill out those reporting requirements, so it's reasonable you could cut back," he told us. "And the com - munity banks were never the problem—they weren't dealing with derivatives, let alone syn- thetic derivatives." An Epitaph for Dodd-Frank? P iecemeal reforms such as these sound generally agreeable for policymakers on both sides of the aisle. But would any of the Demo - cratic and Republican presidential candidates try incremental changes, or the kind of wholesale change they're promising? For G.O.P. candidates, the ques - tion is: Will they, or won't they? Will Republicans preserve their congressional majorities in both chambers and seize the White House, eventually repealing the big financial reform law? Parts of the law have long agitated those on the right. One of the most prominent of these include the CFPB, which the law's proponents excluded from the congressional appropriations process to insulate staff payroll from political considerations. Michael Barr, a University of Michigan law professor who helped pass Dodd-Frank as Treasury assistant secretary, doesn't doubt the ability of any of these candidates to follow through on their campaign promises, especially when coupled with a Republican-controlled Congress. "If they start weakening Dodd- Frank, they'll make the finan - cial system weaker and harm consumers in disasters, and make it more likely that we'll have [an- other] financial crisis," he said. Surprisingly, some conservatives aren't convinced. Asked whether a Republican win would make repeal certain, Calabria said maybe not. Calabria would know. A former congressional aide to Sen. Richard Shelby (R-Alabama), he worked on Capitol Hill over the last decade and was there when the Troubled Asset Relief Program (TARP) and Dodd-Frank began to unfold. "Most of the Republican candi - dates are skeptical of Dodd-Frank, and you have a spectrum where some would likely push a repeal," he said. "Some of them might work within the existing framework." He said there wasn't much talk about an effective alternative to the law. Moran also felt Republicans wouldn't dismantle Dodd-Frank, even with a White House win. "They might make marginal changes, but they're not going to undo it anymore than they were able to undo Obamacare," he said. That's different from what we typically hear from the G.O.P. field. From Trump to Sens. Ted Cruz (R-Texas) and Marco Rubio (R-Florida), the current candidates continue to vow to repeal Dodd- Frank in its entirety. "It's terrible," The Hill reports Trump saying in an interview, adding he would "absolutely" allow its repeal. "Under Dodd-Frank, the regulators are running the banks. The bankers are petrified of the regulators. And the problem is that the banks aren't loaning money to people who will create jobs." In the Democratic nominee race, both Clinton and Sanders have indicated their intentions to either preserve the law or improve upon it, but ask a Sanders supporter and they may well tell you the Clintons' close ties to Wall Street could make the difference in a political fight over Dodd-Frank. These criticisms take on particu - lar importance, one could argue, in light of the tit-for-tat legislative pro- cess that often results in one party trying to include so-called "poison pill" amendments, or policy riders, in must-pass spending bills. Obama endured withering criti - cism from the left over a decision to accept one of these policy rid- ers as part of a $1.1 trillion stopgap spending measure he signed in 2014. That amendment struck through a provision in Dodd- Frank that banned derivatives trading for FDIC-insured financial institutions, and it's arguably given a boost to the Sanders coalition. What's Actually More Likely to Happen W ith all the political spin and hyperbole, experts say something as large and complex as Dodd-Frank lends itself all too

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