Movement To Repeal Dodd-Frank Reaches Senate, But The Argument Is Confusing

Sunday, April 03, 2011 21:44
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Movement To Repeal Dodd-Frank Reaches Senate, But The Argument Is Confusing

A substantial bloc of Republican Senators have sponsored a bill that aims to roll back Dodd-Frank regulations before they really ramp up, but the explanations given could benefit from some fine-tuning.

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I'm not a fan or a foe of Dodd-Frank. In fact, I was shocked when it passed at all, and simply regard it as a piece of the modern industry landscape -- like just about everything else Washington puts out, it's got its good and bad points.

 

But Senator Jim DeMint and his co-sponsors on the euphemistically named "Financial Takeover Repeal Act" seem so dead-set against the new regulations that their arguments against it are too numerous and subtly self-contradictory. 

 

I'm not sure how Dodd-Frank institutionalizes "too big to fail" or perpetuates federal bailouts of Wall Street's giants. What I do know is that quoting Jamie Dimon at JP Morgan as a defender of the little guy is a little strange. 

 

Dimon may be right and Dodd-Frank may drain liquidity out of the economy by making life harder for the giant TARP banks he represents. It definitely seems to be raising compliance costs for many small-scale financial intermediaries.

 

However, surely there's a small business owner out there -- a one-advisor RIA, an independent rep -- who can get in touch with the bill's sponsors and give them a true small business perspective, and not the word of a TARP beneficiary that rivals Goldman Sachs for unpopularity on Main Street.

 

And while the PR surrounding Dodd-Frank was muddled at best, it at least rose to the occasion of positioning itself as being in the best interests of retail investors and borrowers.

 

On the other hand, fighting regulation because it's not in the best interests of business -- that it hurts the financial industry's margins and forces the TARP banks to charge higher fees -- is dangerous spin. 

 

Remember, the one number retail clients don't care about is your profit margin. While the Dodd-Frank rules may be onerous and expensive, fighting them because it makes your life harder is not good PR as long as retail clients are convinced that the rules are protecting them. 

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