What Dodd-Frank repeal would mean for brokerages

Q: I know Congress is trying to repeal Dodd-Frank. What effect do you think that would have on the brokerage business?

A: I’m oversimplifying things somewhat but, as I see it, the Dodd-Frank Wall Street Reform and Consumer Protection Act didn’t really do anything by itself. In general Dodd-Frank simply told regulatory agencies to come up with rules to address various problems that came to light during the 2008 financial crisis.

President Trump with members of Congress signing Dodd-Frank and fiduciary executive order Bloomberg News
U.S. President Donald Trump, center, holds up a signed Executive Order related to the review of the Dodd-Frank Act in the Oval Office of the White House, in Washington, D.C., U.S., on Friday, Feb. 3, 2017. Trump will order a sweeping review of the Dodd-Frank Act rules enacted in response to the 2008 financial crisis, a White House official said, signing an executive action Friday designed to significantly scale back the regulatory system put in place in 2010. Photographer: Aude Guerrucci/Pool via Bloomberg

Repealing Dodd-Frank doesn’t change the fact that those agencies established new rules and revised existing ones, nor will its repeal make those rules suddenly disappear. It is, however, a first step towards reversing those rules. Whether for good or ill, that job is likely to be a long, drawn-out affair.

More significantly, if the repeal is passed, the president would have the power to fire directors of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, and the Consumer Financial Protection Bureau, an agency created by Dodd-Frank with the mission of protecting consumers in the financial sector.

Repeal would also give Congress the authority over the CFPB's budget, meaning that Congress could defund the agency.

Repealing Dodd-Frank would also eliminate Dodd-Frank's orderly liquidation authority, which gives the FDIC the power to step in and prevent a domino effect if a major financial institution fails (as Bear Stearns and Lehman Brothers did during the 2008 crisis).

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Regulatory reform Regulatory actions and programs Regulatory guidance Dodd-Frank Fiduciary Rule Independent BDs CFPB FDIC Fannie Mae Freddie Mac
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