Five myths about Dodd-Frank
By Christopher J. Dodd, Published: October 21
After a worldwide financial meltdown — and a $700 billion taxpayer-funded bailout — the need for common-sense financial reforms was clear. But now, even though the Wall Street Reform and Consumer Protection Act of 2010 (known as Dodd-Frank, after Rep. Barney Frank and me, its sponsors) is only beginning to take effect, critics are launching false attacks against the law in an effort to undermine it. Whether they are intentionally misleading or just misguided, they are wrong about the law’s purpose and impact
1. Dodd-Frank is deepening the economic slowdown.
Critics who charge that the law is aggravating the recession have forgotten where our economic woes came from in the first place.
The 2008 financial crisis was devastating: Banks stopped lending to one another, the credit market froze, and our largest financial institutions neared collapse. Had Dodd-Frank been in place, the damage could have been contained. Instead, the financial crisis sparked a recession, cost Americans millions of jobs and trillions of dollars in savings, forced small businesses to close and drove homeowners into foreclosure.
Today, other challenges complicate our recovery: Our housing market is slumping, a gaping budget deficit threatens America’s fiscal future, and a sovereign debt crisis hangs over the world. But Dodd-Frank didn’t create these challenges.
Meanwhile, even though only 10 percent of Dodd-Frank’s provisions have been implemented so far, critics claim that the law perpetuates “job-killing uncertainty.” In fact, it was the uncertainty inherent in a non-transparent and reckless financial system that made Dodd-Frank necessary in the first place.
The truth is that this catastrophe was years in the making — caused by regulatory neglect and Wall Street gambling. We can’t expect to rebuild our prosperity overnight, but we can’t rebuild it at all if we let false political talking points undermine our efforts to restore confidence in our financial system.