Romney's pledge to repeal Dodd-Frank threatens bank friendly aspects of act

Mitt Romney's pledge to repeal the Dodd-Frank Act threatens to undo all the parts of the Act that were written by the bank lobbyists for the banking industry.

While your humble blogger would like to see ultra transparency required and repeal of all aspects of the Act other than the Consumer Financial Protection Bureau and the Volcker Rule, Wall Street would like the reverse.

According to a Bloomberg article,

Mitt Romney has pledged to repeal the Dodd-Frank Act. He won’t, and that’s just fine with Wall Street. 

Instead, Romney may give the financial industry something it wants more: a revamped Dodd-Frank that would accommodate some of the most profitable and riskiest activities while preserving a patina of protection for investors and consumers.

“There’s this perception that banks hate everything in Dodd-Frank, and that’s just not true,” said Mark Calabria, a former top Republican aide on the Senate Banking Committee. “From a bank’s perspective, you’d rather have piecemeal reform of Dodd-Frank, not only because there are things in the law you want to keep, but also because you’re going to have more control over the process.”...

One of the reasons that the Dodd-Frank Act is a failure is that the average American couldn't tell you what problems the Act is suppose to fix and how the Act is suppose to fix them.  This reflects the simple fact that there was zero public analysis of the causes of the financial crisis prior to passing the legislation.

Without an analysis, there was never time for a discussion of alternatives to fix the problems and prevention of their recurring in the future.

Without an analysis, there was precious little chance that Dodd-Frank would actually address the causes.

What makes the Consumer Financial Protection Bureau and the Volcker Rule unique, is they were effectively appended to the Act by individuals who understood some of the causes that contributed to the financial crisis and not the product of the legislators-lobbyists-regulators who wrote the act.

Glenn Hubbard, an economic adviser to the Romney campaign, said in an Aug. 1 Wall Street Journal editorial that Romney would “work with Congress toward repealing and replacing the costly and burdensome Dodd-Frank legislation.” 

Cost-benefit analysis -- a fixture of congressional Republican proposals aimed at Dodd-Frank -- would be the Romney approach, he wrote....

Regular readers know that regulatory agencies are particularly inept when it comes to performing cost/benefit analysis.

The classic example of this was the cost/benefit analysis that the SEC performed in support of the original disclosure requirements for structured finance securities.  The conclusion of the analysis was that bringing transparency to structured finance securities couldn't be justified.

$4 trillion in investor losses later on opaque, toxic structured finance securities and the cost/benefit analysis looks like it missed something fairly significant.

The provisions that banks and their lobbyists have said go too far, such as bans or limits on trading activities including the so-called Volcker rule that bars banks from trading for their own account, have been specifically targeted by Republicans, who almost unanimously opposed the law in 2010. 

So much for the Volcker Rule.

The hit list also includes the consumer bureau, a regulator whose potential independence and power drew opposition as Dodd- Frank was being drafted from an array of interests, from the U.S. Chamber of Commerce to Dimon, JPMorgan’s chairman and chief executive officer. Dimon, in a 2011 letter to shareholders, said the bureau, which is housed within the Federal Reserve but maintains its independence, needed to be “effective for both consumers and banks.”

And the Consumer Financial Protection Bureau too.