This month marks the 2nd anniversary of the Dodd Frank Wall Street Reform and Consumer Protection Act signed into law by President Barack Obama in 2010, which places the regulation of the financial industry in the hands of the government.
Democratic Political Consultant Brad Bannon, of Bannon Communications Research in Washington, D.C. says that while Dodd Frank has been successful so far, we have to give it more of a chance. When the banks and federal institutions went belly up in 2008, congress was kind enough to give them $3 trillion in rescue money.
There were two things that bothered people, says Bannon. One, by giving banks a bail out, we were rewarding the bad behavior that accounted for the beginning of the economic recession in the first place, instead of punishing them. Second, when congress voted to give Wall Street money, there were no conditions for getting the money. Essentially, congress gave them a blank check, to be used at the bank's own discretion and as we now know, some banks used this money for golden parachutes for their CEO's, corporate retreats in the Bahamas and naming rights to sports stadiums, ie Citifield for the New York Mets. Bannon says people felt there needed to be some accountability and that was the purpose of the Dodd Frank law.
The federal government has to issue regulations that supplement the legislation. Republicans in congress have been stopping the regulations from being implemented and so far, they've done a good job of slowing the implemenation of the law, which makes it too early to tell how effective its been, according to Bannon.
Dodd created two new federal bodies which consolidated a lot of the consumer protection and federal financial agencies in the government. It created the financial oversight council to regulate dealings on Wall Street and also created the consumer protection bureau to protect consumers when they deal with banks and other financial institutions in the context of getting loans. However, the reality is that because of the recession, big banks haven't been granting loans anyway, which is one of the reasons the recession is still going on, Bannon says. "Congress should implement all the details of Dodd Frank so it can work well," says Bannon and if not, we are still going to have some bank failures and risky behavior that caused the recession in the first place.
Brad Bannon is President of Bannon Communications Research, a Washington, D.C.-based political polling and consulting firm. More information can be found at www.bannoncr.com. This video commentary was hosted byThe Legal Broadcast Network, which provides on-demand legal content.