Democrats increasingly speak out against Dodd-Frank

Brian Schweitzer

Republican criticism of the 2010 Dodd-Frank Act has garnered substantial media attention in recent months, but more Democrats have also begun to speak out against the massive financial overhaul.

Dodd-Frank has been criticized by some as being overly burdensome and costly to smaller financial institutions that had nothing to do with the recent economic collapse.

Montana Governor Brian Schweitzer criticized Dodd-Frank’s effect on small banks during his appearance last Friday on HBO’s Real Time with Bill Maher.

“Banks that actually did their job like in Montana—where we didn’t have banks go upside down, because they made you bring your financial in and they’d only loan you money if they understood your business plan—now, they are the ones that are being penalized,” Schweitzer said, the National Review reports. “They now have more regulation on them, and it’s more difficult for them to make the loans. The very banks that were doing their job are having a tougher time because of the banks that are too big to fail.”

Certain Dodd-Frank provisions in particular have been criticized by both sides of the aisle. Section 941 of Dodd-Frank, which establishes criteria for a “qualified residential mortgage,” has attracted opposition from more than 160 members of the House of Representatives and 40 members of the U.S. Senate.

“The strict, inflexible restrictions proposed by banking regulators could put home ownership out of reach for many credit-worthy American families,” Sen. Kay Hagan (D-N.C.) said, according to the National Review.

Section 941 and a similar provision are currently being revised by the Consumer Financial Protection Bureau, and the effective date of the rules has been pushed to 2013.

The provision further highlights the advantages given to too-big-to-fail institutions, including the two institutions that played a major role in the recent financial crisis and ensuing downturn – Fannie Mae and Freddie Mac, the National Review reports.

The “qualified mortgage” rule exempts all mortgages purchased by Fannie and Freddie, specifying that such mortgages are effectively “qualified.” The proposal also suggests a 20 percent down payment for most mortgages but does not mention a specific down payment for those mortgages bought by Fannie and Freddie.

Dodd-Frank regulators, however, maintain that Fannie and Freddie pose no risk to financial institutions, as the loans owned by Fannie and Freddie are taxpayer-guaranteed, indicating that taxpayers may assume more risk than financial institutions, according to the National Review.

Republicans and Democrats have also opposed the controversial Durbin Amendment, legislation pushed by the retail industry that caps the amount a bank can charge a merchant to process a debit transaction. Experts estimate that Durbin price controls will save the retail industry $8 billion.

When retailers made the case for the Durbin Amendment, they told Congress that the savings would be passed to consumers in the form of lower prices. The National Retail Federation estimates that retailers are saving close to $18 million per day, though little data exists to support the claim that consumers are benefiting from the legislation.

The legislation has attracted opposition from key Democrats, including Debbie Wasserman, the chairwoman of the Democratic National Committee. The Obama administration, however, has continued to stand by the massive financial reform law, the National Review reports

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