Dodd-Frank battle between Democrats, Republicans rages on

Jeb Hensarling

Jeb Hensarling

The debate over the controversial Dodd-Frank Act rages on, as liberals and conservatives seek to find common ground on the massive financial reform legislation intended to end America’s “too-big-to-fail” problem and strengthen the U.S. banking system.

“There is a potential for an alliance between liberals and conservatives,” James Kwak, the co-author of “13 Bankers: The Wall Street Takeover and the Next Financial Meltdown,” said, according to The Washington Post. “Liberals don’t like that big banks have lots of market power, which enables them to act in a predatory manner. Many conservatives don’t like the fact that these banks have an implicit government subsidy.”

Kwak said that while lawmakers continue to battle over bank size, the balance of power in Congress has not shifted enough to allow substantial reform efforts.

Legislation aimed at ending America’s “too-big-to-fail” problem will have to pass through the House Financial Services Committee chaired by Texas Republican Jeb Hensarling. Though Hensarling is a fierce community bank advocate, he does not advocate the break-up of America’s largest financial institutions as suggested by Federal Reserve Governor Daniel Tarullo, The Washington Post reports.

Hensarling is against federal guarantees for home mortgages and seeks to resolve Fannie Mae and Freddie Mac. Rep. Maxine Waters (Calif.), the ranking Democrat on the HFSC, does not want to send the mortgage market to private firms, but she and Hensarling may be able to agree on some aspects of housing reform.

“Hensarling and Waters could become the new power couple in financial services,” Senior Policy Analyst of Guggenheim Partners Jaret Seiberg said, according to The Washington Post. “They’re polar opposites from their political backgrounds, but they will share key objectives.”

Though bipartisan coordination has lacked over the recent session of Congress, lawmakers have shown through the passage of recent bipartisan legislation, including a bill to examine the economic benefits “too-big-to-fail” banks receive, that it is possible to work together.

“It’s clear Congress is thinking about the extent of government involvement in the financial markets, but the legislative approach will likely be incremental,” University of Maryland Economist Phillip Swagel said, The Washington Post reports.

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