In an effort to grow the economy through pro-business policies, President-elect Donald Trump has promised to pare down big government in favor of fewer regulations. There are many question marks as we roll into 2017, many of which won’t be answered for months to come.
One of these is the Dodd-Frank Act. Established in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, better known simply as the Dodd-Frank Act, made changes to financial regulation after the Great Recession to protect consumers from the shady lending practices that caused the housing collapse.
"Big banks got bigger while community financial institutions have disappeared at a rate of one per day, and taxpayers remain on the hook for bailing out financial firms deemed 'too big to fail.' The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation."
- Statement on Trump’s Presidential Transition Website
One case for dismantling Dodd-Frank is the increased cost of providing loans. Because of additional regulations imposed by Dodd-Frank, banks have to spend more to provide loan services. These costs are passed onto consumers, making it harder for lower income or those with less-than-ideal credit to get loans in the first place. This often results in small businesses being unable to secure loans, preventing growth, which in turns prevents the creation of jobs. Since job creation is a high priority for Trump, he sees Dodd-Frank as an impediment to be removed.
On the flip side of the coin, others argue that dismantling Dodd-Frank will delve the country into another recession by returning the country to a state where a lack of financial oversight that allows big banks to take advantage of consumers. The fear is that this will lead to another recession, closing of businesses, and loss of jobs - in other words, the very thing that Trump vows to avoid.