When looking at US banking and economic history, there is a clear pattern of crisis, followed by regulation, followed by de-regulation, followed by crisis. In weakening Dodd-Frank banking regulations Congress is continuing that cycle and setting up a new recession, argues Bill Saporito in The New York Times. This de-regulation of banks will allow them to take risks that could have drastic effects on the whole country in the case of economic downturn. The Panic of 1873, Great Recession and crash of 1987 are examples of that. Such de-regulation has historically happened in times of economic health, as people forget what happens when things go less well.
The criticism of recent amendments to the Dodd-Frank Consumer Protection Act misunderstands their usefulness, asserts John Webster of Real Clear Policy. These reforms will allow smaller community banks to avoid heavy regulations and burdensome costs. Such banks didn’t crash the US economy and were unfairly punished by Dodd-Frank, to begin with. The regulations also put them at an unfair disadvantage; they can’t afford the teams of lawyers that banking giants have, to navigate each detail. It ends up with them providing a worse service to customers. Tweaking Dodd-Frank is a positive move that will spur competition and economic growth.