Could Dodd-Frank be a dud?by Tim Manni
You will commonly hear the Dodd-Frank bill come up in the midst of all the conversation surrounding the recently-announced strategies for reforming Fannie Mae and Freddie Mac. The reason is, Dodd-Frank is a major piece of legislation that has already begun to take form, and is expected to continue to influence the landscape of the market and ultimately impact the structure of the GSE reform.
The Dodd-Frank bill is commonly referred to as “the most sweeping financial reform since the Great Depression” (or something very akin to that). Proof that Dodd-Frank is living up to that moniker is the Consumer Financial Protection Bureau (CFBP), slated to open up shop this July.
Despite all the “sweeping reform” that’s either gently upon us or lurking just around the corner, there’s a certain sentiment that these reforms could possibly be stopped before they ever have a chance to really leave their footprint.
Republican lawmakers fought against Dodd-Frank — named after two Democratic lawmakers — last year when their presence in Congress was much smaller, and they’re fighting against the bill even more so now that their presence on Capitol Hill has been bolstered following the November elections:
Republicans didn’t take the Senate last November, but they have momentum. Eight months after Dodd-Frank passed Congress, the revived conservative base of the GOP, driven by Tea Party gusto, is taking aim at the law that they believe will hurt credit, create a bureaucratic quagmire and, in the end, kill jobs.
Republicans, who may be counting on financial industry campaign donations as the presidential election year of 2012 draw closer, don’t have to repeal the law.
As with the polarizing health-care law, they say they want to slow the pace of reform, and revisit some of the budget items included in the new law, including the Consumer Financial Protection Bureau created by the legislation.
If they can buy time until 2012, and take more control in Washington in that election, Dodd-Frank may end up becoming a footnote rather than what its backers call it: the most sweeping reform since the Great Depression.
The bottom line here is this: we’re in the midst of an ever-changing regulatory environment. Until things settle down, until private players get a true sense of what the playing field will be, don’t expect the private market to return from the sidelines. And having the private market return is something the Treasury is really banking on when it comes to winding down Fannie Mae and Freddie Mac.