In what is being hailed as “a win for the American public,” the D.C. Court of Appeals granted standing to challenge in court the constitutionality of certain provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The D.C. Circuit Court handed down a favorable ruling in the Competitive Enterprise Institute’s (CEI, a D.C. free market public policy group, established in 1984), case challenging the constitutionality of key provisions in the Dodd-Frank Act.
Sam Kazman, CEI general counsel stated, “The D.C. Circuit’s ruling today (July 24th), opens the door to a court test of the Consumer Financial Protections’ Bureau constitutionality. Since Dodd-Frank’s enactment five years ago this month, the CFPB has inflicted damage on huge segments of our economy. Its powers are so free-roaming that they are unprecedented in our history. The fact that our standing to challenge the CFPB has been upheld is great news for us, the plaintiffs, and even greater news for the American public (ruling in State National Bank of Big Spring Texas, et al v. Lew, et al).”
Five years after its passing, the Dodd-Frank Wall Street Reform and Consumer Protection Act (pub. L111-203, H.R.4173), otherwise known as Dodd-Frank, is under intense scrutiny by several think tanks, the community banking industry and prominent deregulators.
The Act, signed into law by President Obama on July 21, 2010, was passed as a response to the worst financial recession in US history. It brought the most significant changes to financial regulation in the United States since the regulatory reform that followed the Great Depression. The law places significant regulations on financial institutions to prevent unnecessary risk-taking and abusive lending practices.
The Dodd-Frank Act includes the Financial Stability Oversight Council that monitors banks from becoming too big to fail. It made changes in the financial regulatory environment that affect all federal financial regulatory agencies and virtually every part of the financial services industry.
Dodd-Frank has its share of critics. Some say it did not go far enough to prevent more bailouts and another financial crisis, while others, including several lawmakers opposed to strict government policing of the financial industry, argue the Act went too far and unduly restricted financial institutions.
According to Dennis McCuistion, a Director at the National Center for Policy Analysis (NCPA), “Unlike most agencies, the CFPB does not have aboard, does not report to Congress or get authorized funding since it is housed at the Fed. It’s ironic, given the Fed’s birthing of the crisis. In short, it can, and does run rampant particularly over community banks (though the promise was that it would only affect big banks).”
Allen West, former congressman and the President and CEO of NCPA, says “Through Dodd-Frank, we have seen the lifeblood to small businesses, small community banks, being decimated by the legions of regulations and regulators that swarm them.”
The bottom line is Dodd-Frank was written primarily to control the TBTF banks, and yet those same banks and their lobby are systematically gutting those provisions directed at them. An example of this is the elimination of the prohibition of using insured deposits to gamble with derivatives.
This is leaving much of the rest of Dodd-Frank, such as the Consumer Finance Protection Bureau and the related huge new compliance costs falling disproportionately on the community bankers.
[tweetthis url=”http://buff.ly/1MvNT6x”]Much of #DoddFrank falls disproportionately on community bankers.” ~ @RichardMBowen #cfpb #cei [/tweetthis]
Ironically , the largest banks will still not be effectively controlled and will be the only banks able to afford the dramatically increased compliance costs associated with the CFPB and the other new regulations associated with Dodd-Frank.
Community banks and their important role in our communities are being threatened. They’ve had enough and are fighting back, challenging the constitutionality of some of the provisions of Dodd-Frank, including the CFPB.
They have a big fight ahead of them. I wish them luck.