A Rollicking Debate: Readers React to Dodd-Frank Dismantle

Markets edged slightly higher midday Tuesday, as gains in the technology sector largely offset declines in the energy space.

Still, the markets were extraordinarily quiet today, as there wasn’t a whole lot of market-moving earnings, economic or political news that pushed traders in a material direction.

The relative lack of big, market-moving headlines gives us a chance today to look back at your comments from Monday’s Afternoon Edition, which generated a whole lot of buzz.

In fact, the feedback on our piece, “President Trump Determined to Dismantle Dodd-Frank,” reflected just how fired up readers are — both pro and con — about the issue of deregulating the financial sector.

Today, it’s your turn to shine, as we open up the digital forum to readers who’ve sent us comments on this issue.

So, readers, take it away …

Mike C. writes:

Trump claims that regulations cost banks “hundreds of billions of dollars” every year. Since he didn’t give an exact figure, let’s say $250 billion. Considering that the GDP of the entire USA is about $5 trillion a year, that would mean that 5% of the GDP is being spent just on bank regulations. That sounds pretty implausible to me.

Brad response: Great point, Mike. I think it’s hard to quantify precisely what the cost of Dodd-Frank is in terms of missed opportunity for economic growth. I do think it’s safe to say that a lot of credit-worthy businesses are having a hard time expanding operations and doing more capex spending because they cannot get the money from banks.

That said, some argue that it’s not a lack of supply that’s causing a lack of lending. Rather, it’s the lack of demand for loans.

While I suspect that’s true in some cases, I know firsthand and also from close friends and associates that getting a loan before Dodd-Frank was far easier than it is after Dodd-Frank.


Frequent contributor Broomy writes:

While easing Dodd-Frank may encourage banks to lend more money, I’m not sure that’s necessarily what we want. Aren’t liar loans and home loans to anyone with a pulse, regardless of whether they could pay it back, what got us into the problems we’re still struggling to free ourselves from?

Brad response: I think Broomy is correct in terms of those “liar loans” that contributed mightily to the financial crisis. Yet the pendulum does seem to have swung in the opposite direction, and far enough to where the restrictions are hurting businesses and would-be homeowners, not helping the whole system.


Eleanor A. writes:

Based on the multitrillion-dollar deficit that we are facing in our economy, I don’t think that banks should have freedom to create more financial chaos than we had eight years ago. If they go back to their old tricks creating derivatives and bamboozling the public, the only people left standing at the end will be the 1%. On the other hand, a two-year delay in making those changes might mitigate the effect of bank exuberance. I think we need to be very careful and painstakingly slow about how we relieve bank restrictions.

Frequent contributor Billy writes:

The concern right off the top is: Are the Banking Elite trying to co-opt Trump by getting him to relax regulations — which would bring us back to the environment that led to immoral and unethical lending, bond rating, and mortgage-backed derivative creation — or does he see banking deregulation as key to kick-starting the economy? The MAJOR problem is the world is ALREADY AWASH IN MASSIVE AMOUNTS DEBT and, at this point, you are simply pushing on a string if you believe that lowering interest rates and relaxing lending standards is going to work.

Brad response: Like Eleanor, I also think we need to implement changes to banking regulations slowly. That is why the Trump executive order is essentially a call for ways to properly implement changes that will, ostensibly, correct the current law so that it offers the needed protections along with the loosening up of banks that will help the economy grow.

Billy also makes a great point about debt, as a world awash in debt is a very big problem for the economy. And while debt is a big issue on a macro level, when it comes to good companies struggling to expand and hire more workers, a well-placed, rational business loan is what is required.

So, we can talk about debt in the abstract as being too massive. But from a micro perspective, sometimes debt is just what the economic doctor ordered.


Let’s keep the discussion going! If you want to comment on this issue, or any of the issues we cover in the Afternoon Edition, all you have to do is leave me a comment on our website or send me an e-mail.


The Dow and Nasdaq notched a pair of record highs, at 20,090.29 (+0.2%) and 5,674.22 (+0.2%), respectively. Meanwhile the S&P 500 stayed flat, although the Energy SPDR (XLE) slid 1.4% thanks to weak gasoline demand and worries about higher U.S. shale production to come. This knocked crude oil down 1.6% for the day, with WTI closing at $52.17 a barrel.

• $100 billion: That’s how much the six biggest U.S. banks could return to investors, through dividends and share buybacks, if President Trump is successful in “cutting out a lot” of the Dodd-Frank Act’s rules as promised. (Wall Street Journal)

• Fox (FOXA) reported a 27% increase in profits during its recently ended fiscal Q2. It attracted big bucks from political advertisers and those looking to reach World Series watchers. (And advertisers paid up when Game 7 went into extra innings in November.) Revenues from Fox’s TV segment were up 12% last quarter. This translates into EPS of 53 cents on revenues of $7.7 billion.

• Fox drew an extra $20 million in ad revenue (for four spots) after the Super Bowl went into overtime Sunday night. This made it the company’s highest revenue day ever, and offers a great start to the company’s Q3. (Adweek)

• Drug prices rose 10.7% last year on average, per pharmacy benefits manager Express Scripts (ESRX) in its new Drug Trend Report. Employer costs rose 2.5% across all prescription drugs, while the Consumer Price Index rose 2.1%. ESRX notes that price inflation for common household items rose 14% since 2008, while the average brand-name drug tripled (to $307.86) in that time. (We recently wrote about the new war on drug prices.)

• Want to save gas? Don’t turn left: That’s what UPS Inc. (UPS) tells its drivers. Well, it actually instructs them not to turn through oncoming traffic, depending on the country. This might add some time or distance to drivers’ routes, but this policy saves the company on average 10 million gallons of gas a year. That translates to 22,000 tons of carbon dioxide that is not emitted, 1,100 trucks it doesn’t have to put on the roads and 350,000 MORE packages delivered a year. (Quartz)

Good luck and happy investing,

Brad Hoppmann
Uncommon Wisdom Daily

Your thoughts on “A Rollicking Debate: Readers React to Dodd-Frank Dismantle”

  1. The big banks have already leveraged our deposits out by over 80% on derivitives. They are allowed to gamble our money away. Why would we want to give them more rope to crash the system again. Because of a little clause in the Bill, called The Bail in”, the banks are alliwed to use our deposits to pay thei investors. Sounds like Greece all ovef again. Ellen Brown, writer for the Huffington Post, wrote, “The Bank crisis will be worse than ISIS.” why would we want to de-regulate a drunk and out of control driver?
    Mary H.

  2. One INDENDED effect of the regulations were to drive small home grown very stable banks out of business because the amount of record keeping would often need more employees than they already had total.

  3. Dodd – Frank is killing businesses ability to borrow and expand, and HIRE! Repealing the Community Investment Act would allow banks to not make bad loans which caused banks to create the derivatives (to hedge against potential non-performing loans) that ultimately took down the financial system.

  4. I know we have entered into living in a factory World these days, but for the few of us that fax still matter, the GDP of the US is almost 17 trillion dollars, not 5 trillion dollars. I guess it should be not shocking to me that no one pointed this out

  5. Right up front, I don’t care if this is Donald Trump, Hillary Clinton or Mickey Mouse, I would say exactly the same thing. Only the name would change:

    I find Trump’s own comment very revealing of his true motive. I read the transcript of his interview and He stated it very plainly.

    He said that some friends of his with businesses were unable to get loans and that this would help them. What about us, the tax payer who will have to bail out these shysters again?

    Wasn’t the housing bubble enough? And how often are we going to fall for our party’s b.s., whether we are democrat or republican?

    Isn’t it time we researched and decided for ourselves, based on how the things they are proposing will affect us personally, not as a party drone?

    If these businesses were solvent, with a good product or service to sell, surely someone would already have given them a loan? Or is their credit that bad?

    And notice that these are his friends? What have they done for him that has not been disclosed?

    Why should the taxpayer have to bail out any politician’s friends?

    Think for yourself, you should be concerned with being an American first, doing the right thing for the average citizen’s bank book and our Country, not enriching a few millionaires with bad judgement regardless of who’s friend they are.

    If the person repealing Dodd Frank was Hillary, Bernie or Jill Stein, how loud would you be screaming, calling them Un American, and maybe even calling for impeachment?

    Be honest, at least with yourselves.

    Another financial crash is not needed, and this could be the trigger.

  6. As if throwing the Glass–Steagall Act out the window wasn’t bad enough.

    Banks should be held on a very tight leash always. After all…….. who has created all the bubbles of the 20th and 21st century? Every stinking one of them. Who has to clean up the mess? The 99%. Every time.

  7. On the issue of Dodd-Frank, the problem we keep going around is that we need Glass-Steagall back. Let the banks loan as much money as they want to — their money, not from the Fed — and let them control their risk by knowing that THEY are on the hook for lending that goes bad. The only reason we need regulations is to protect the taxpayers/depositors from bad actions by the banks. Take the taxpayer/depositor guaranty back out of the equation, let the banks once again shoulder the negative consequences of their poor risk management, and the banks will immediately improve their practices. No more socialism for the wealthy/capitalism for the rest of us. Why are Congress and Executive branch trying everything EXCEPT protecting the taxpaying public? Is making us liable for bail-ins REALLY a fix for this mess?? This single issue is a clear demonstration of the criminal culpability of our “elected” representatives.

  8. Without getting into the weeds the banking issue started when Congress decided to kill the Glass Stegal Act worst thing ever. Second allowing these mega mergers amongst banks creating these giant organizations so they now fall under the idea To Big To Fail” is insame. Finally letting banks try to be all things to all people just feed into their own ego and greed. Selling insurance, mutual funds etc, etc and etc. is crazy. Granted Dodd-Frank has some very draconian components that need exercising there still remain some good parts. But like some much of what Congress does ends up going over board or frankly failing to enforce existing rules. 2008 collapse is as much the fault of Congress as Wall Street . Wall Streeters are nothing more than opportunist give them an opening and they are going to showing you just how creative they can be and did they ever. It seems ever major down turn this country has experienced we can trace back to the ignorance of Congress truly not knowing the unintended consequences of their actions. I deal with the banking world daily and frankly it is no fun. The amount of trees we have cut down to help paper their files is disgusting., Enough of my comments.

  9. I would prefer eliminating D-F as long as the banks must run on the own, and NEVER be bailed out governmentally.
    The excesses of the crisis were due to in large part to governmental policy pressures, and the ability to peddle the loans, with no recourse, before the ink dried.
    Make the notes full recourse and suddenly the banks will start paying attention.

  10. Brad,
    Mike C. wrote, “Considering that the GDP of the entire USA is about $5 trillion a year, that would mean that 5% of the GDP is being spent just on bank regulations.” However, per the Bureau of Economic Analysis, 2016 GDP was over $18.5 trillion … $250 million is 1.35% of $18.5 trillion. You’re a sharp dude, so I was surprised you didn’t pick up on this. Nonetheless, keep up the good work.
    Sincerely, Steve

  11. As a former small town banker,(retired) I can assure you that most main street bankers believe in safety and soundness regulation but do not embrace Dodd-Frank. D-F has made TBF banks too big to manage and too big to bail out-by anybody. It only took eight years to bring on a banking crisis after repeal of Glass-Stegal. Glass Steagel whose repeal was lobbied heavily by the five or six mega banks. Dodd Frank has made ghost banks out of main street banks and ghost towns out of small rural communities.

  12. I find it quite ridiculous that the banks were forced by congress in the first place by law to extend loans to people who didn’t qualify- banks were told they were being discriminatory! Then they complied and voila- 2008. So we get more regulation from D.C. punishing the banks for compliance! And so it starts to swing back- I’m all for relooking at the Dodd-Frank banking regulations- with a long term view instead of knee jerk reactions!

  13. The financial institutions want to be put back into the situation where they can gamble and game the system without consequence for those pulling the strings. They got taxpayers to bail them out the last time when things went oh so wrong and I am sure they would not hesitate to do it again. What they did was illegal, but how many of them went to jail. Sure, they paid some meager fines, but as a percentage of the profits, the fines were chump change. And in the end, the shareholders paid the fines, not the executives that profited from the swindle.

    Our banks and our economy and the sharing of wealth was best back in the days of higher taxes and heavier regulations. The financial institutions have proven that they cannot be trusted, so why give it all back them now.

  14. I’d be happy to see Dodd-Frank rolled back, but ONLY AFTER Glass-Steigel is re-instituted. Separate commercial banks from the brokerages and the banks would be far more willing to make business loans because their brokerage profits would no longer be available.

  15. My experience with banks is that if you are a small business owner they aren’t golfing buddies with, they’ll ask for everything under the sun (probably including a DNA sample), and still won’t give you the loan unless you post that amount of money in their bank. But if you’re a buddy or have street cred (e.g. everyone knows Bernie Madoff is good for the cash), you’ll get whatever you need.

  16. Dodd-Frank solidified the position of the large banks, provided huge bonuses to those who caused the housing crash, destroyed many mid-sized banks, caused many smaller stable businesses to lose their lines of credit to finance inventory, and resulted in the cancellation of credit cards to over one million mostly poor people. The latter now must resort to the so-called “pay-day” loan sharks, who somehow charge up to 600% interest. What’s not to like about this terrible legislation.

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