A look at Dodd-Frank, one year later
Tess Vigeland: The Dodd-Frank financial reform law turned one year old this week. The original idea behind the bill was to help avoid another economic crisis. In that effort, Congress created more than 350 rules to monitor the financial system. So where do things stand a year later?
Here’s a report card from commentator Richard Barrington.
Richard Barrington: The Dodd-Frank Act is more than 800 pages long. That’s not the type of legislation that cleanly addresses a specific problem. So how have consumers fared since the law went into effect? The answer is a mix of good and bad. Let’s start with what should worry consumers.
One of the worst parts of the Dodd-Frank law is something called the “Durbin Amendment.” This comes into play every time you swipe your debit card at a store. The Durbin Amendment directs the Federal Reserve to cap interchange fees. That’s a fancy way of saying banks can’t collect as much money from retailers for processing debit card transactions. So, that’s a plus for retailers, but not so much for consumers. After all, no one is naive enough to expect retailers to pass those hidden savings along to their customers. What you can expect is that banks will make up for those lost revenues in the form of other fees.
Now the good, there were some clear wins for consumers in the bill. For example, the law made the $250,000 limit on deposit insurance permanent. This limit used to be only $100,000. So more of your money can be protected by the government. But perhaps the most important aspects of Dodd-Frank are rules on how much banks can speculate with your deposits. The days of banks putting your money at risk for their profits should be over. There are stricter rules now on how they use your deposits.
That should be a big win for consumers. But since Dodd-Frank became law, the effort to water it down has been relentless. Millions have been spent to lobby against its implementation. So the real question is: Can our politicians and regulators resolve to keep the consumer protections in place? Consumers won’t win if special interests erode the best features of this law.
Vigeland: Richard Barrington writes about personal finance at MoneyRates.com. Give us your thoughts on financial reform on our Facebook page or here.
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