Before Dodd-Frank’s passage, former Sen. Chris Dodd said that “no one will know until this is actually in place how it works.” Today we know. The law he co-wrote with former Rep. Barney Frank is gradually turning America’s largest financial institutions into functional utilities and taking the power to allocate capital—the lifeblood of the U.S. economy—away from the free market and delivering it to political actors in Washington.
– US Congressman Jeb Hensarling
And we are supposed to believe that the Smart People in Washington know what is best for us? More from that column after the jump along with some observations from Powerline (emphasis mine):
Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.
Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card.
Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.
Has Dodd-Frank nevertheless made the financial system more secure? Many of the threats to financial stability identified in the latest report of Dodd-Frank’s Financial Stability Oversight Council are primarily the result of the law itself, along with other government policies.
And there’s a new report by John Berlau of the Competitive Enterprise Institute, which shows how Dodd-Frank has stifled competition among the banks. The “failure to approve new banks, for instance, means that those ‘too big to fail’ banks are now more entrenched than ever.” Indeed, in the last five years regulators have approved only one new bank, as opposed to an average of 170 new banks per year before 2010. According to Berlau: “This lack of new bank competitors is one important reason why a large bank failure could severely curtail the supply of credit and availability of financial services. That in turn sets the stage for a continuing cycle of bailouts.”
