The Truth About the Dodd-Frank Repeal

[tsuke]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

 

[tsuke]

democrats got the bernie "kill the big banks" crowd to enthusiastically support a law that ended up concentrating almost 50% of the banking industry in 4 banks.

LOL!

 

[frigidweirdo]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

The problem is the Republicans are as controlled as the Democrats are, and whatever law they bring in to try and "solve" the problem, it almost certainly won't. There is no interest in solving any problems in govt in the US.

 

[tsuke]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

The problem is the Republicans are as controlled as the Democrats are, and whatever law they bring in to try and "solve" the problem, it almost certainly won't. There is no interest in solving any problems in govt in the US.

they didnt have to pass the giant pay off to big banks that dodd-frank is. they could have left well enough alone.

Before Dodd-Frank 4 banks controlled 11% of the banking industry and they were called too big to fail. After Democrats passed their law to limit the actions of these 4 banks they now control 43% of the banking industry.

Small banks are failing at unpresidented rates too. In Obamas entire time as president a whole 3 new banks started.

 

[Dale Smith]

Until you get rid of the Fed and return to an honest monetary system, this country will continue to drown in debt created by interest on credit created out of thin air.

 

[frigidweirdo]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

The problem is the Republicans are as controlled as the Democrats are, and whatever law they bring in to try and "solve" the problem, it almost certainly won't. There is no interest in solving any problems in govt in the US.

they didnt have to pass the giant pay off to big banks that dodd-frank is. they could have left well enough alone.

Before Dodd-Frank 4 banks controlled 11% of the banking industry and they were called too big to fail. After Democrats passed their law to limit the actions of these 4 banks they now control 43% of the banking industry.

Small banks are failing at unpresidented rates too. In Obamas entire time as president a whole 3 new banks started.

The problem is something should have been done long before the banking crisis happened. Anyone with half a brain and being impartial could have told you it would happen, and it will happen again. The govt is just too much in the pocket of these people, they like large corporations, they hand out the cash to politicians easily.

 

[tsuke]

Until you get rid of the Fed and return to an honest monetary system, this country will continue to drown in debt created by interest on credit created out of thin air.

my main issue with the fed is when a democrat was president they kept interest rates at near 0 till almost the end of his term to the detriment of the economy. This meant that his budgets and deficits looked better than they were supposed to as debt servicing was cheap because interest rates were low. This let them pass stuff that would otherwise not have.

The moment a republican stepped in (trump) we had i think 2 or 3 increases in the interest rate already and they are discussing 2 more this year.

 

[Dale Smith]

Until you get rid of the Fed and return to an honest monetary system, this country will continue to drown in debt created by interest on credit created out of thin air.

my main issue with the fed is when a democrat was president they kept interest rates at near 0 till almost the end of his term to the detriment of the economy. This meant that his budgets and deficits looked better than they were supposed to as debt servicing was cheap because interest rates were low. This let them pass stuff that would otherwise not have.

The moment a republican stepped in (trump) we had i think 2 or 3 increases in the interest rate already and they are discussing 2 more this year.

I agree with you on that point but it goes deeper......

 

[Stratford57]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

Tsuke, your posts have been pretty darn good for a rookie. I'm glad you joined this forum

 

[tsuke]

Republicans in the house have voted to repeal Dodd Frank and replace it with the choice act. As usual they have declined to explain why this is done and have let the Democrats control the airwaves with their message of the Republicans who have been bought by the banks and are going to crash the economy with their greed. One of the most frustrating things about supporting Trump and the Republicans is that they generally do the right thing but cannot seem to explain why they are doing it. This is especially important in a complex issue like this one. By all means the article I am writing should come from the Wall Street Journal, National Review, or even the Trump administration itself. Yet they decline to do so placing the burden of explaining why this must happen on the shoulders of independent bloggers like myself with our vastly more limited reach.

It is very easy to have a knee jerk reaction to this issue but for something this critical it is very important to understand why it is being done.

State of the Banking Industry

In order to understand why this must be done we have to take a look at how the banking industry is doing. After all maybe there is no problem and this is just being done for the sake of corporate greed.

If I were to ask you why you support Dodd-Frank your answer would most likely be to rein in big banks, to break up big banks, or something along the vein of placing less power in the hands of big banks. After all it is because of the irresponsibility of the banks that are deemed too big to fail which caused the financial crash to happen.

How has Dodd-Frank affected these banks? The best data I could get is that in 1995 giant banks controlled 22% of the assets of the banking industry. 13% of which are controlled by 4 companies Citigroup, Chase, Wells Fargo, and Bank of America. As of 2015 giant banks controlled 63% of the assets of the banking industry and the top 4 banks mentioned control 42%. The giant banks nearly tripled their market share. What about the smaller banks? Since Dodd-Frank started a quarter of local banks have closed. Can you guess how many new banks of any size have opened since Dodd-Frank started? How many new banks we have had in the 7 years since Dodd Frank was signed into law? Take a moment to take a guess before going on. There have been a total of 3 new banks. 3. Before Dodd-Frank you had hundreds opening every year. Now we have 3. In seven years.

If Dodd-Frank was supposed to curb big banks it has failed spectacularly. In fact it has even helped concentrate even more assets into these banks. If you thought they were too big to fail before then they are even more so now. This is a dangerous trend that we have to break and instead of having it slow down it is accelerating. As of right now we have 4 companies who own almost half the banking industry. Repealing and replacing Dodd-Frank into something that helps smaller banks must be done.

The Solution

Republicans have put forth the Financial Choice Act as a solution to the problem. The bill is very long and a copy of it is available in the government website so I will give the barebones summary. In a nutshell the bill says that if a bank of any size were to meet a reserve requirement of 10% then they would be exempt from most of the regulations of Dodd-Frank. Under Dodd-Frank the reserve requirement is 3%. The crucial section here is that it is voluntary. A bank would have to choose to meet the requirements to get out from the regulations of Dodd-Frank but is not forced to. At this point it is important to understand what the reserve requirement is otherwise it will seem like the banking industry is getting something for nothing.

Most countries have something called a reserve requirement. This is the percentage of the total assets the bank has lent out that it must have on hand. This is usually in the form of physical cash in a bank vault or deposits to the central bank. For instance if a bank has lent out 100$ then it must have 3$ in its reserves under Dodd-Frank or 10$ if it wants to get the benefits of the Choice act.

This is important because banks earn money by lending out money. Whether it be thru fees, interest or any other method money has to be lent out before it can earn money. This is also the reason why Giant banks cannot benefit from the Choice Act. All the giant banks have shareholders who expect the same level or more of profits every year. You just cannot make the same level of profit by loaning out that much less money.

Giant banks also make most of their money on fees. Whether the accounts are paid back or not what is most important is there is a lot of them generating various fees. If they go into collections then the big banks just sell it to an agency and make some of the money back anyway. Smaller banks make most of their money on interest. It is important to them to have the loan active and current. They have to pick and choose who to lend to carefully so the 10% reserve requirement fits their portfolios perfectly.

This creates a two tiered system. When you ask for a loan or a credit limit increase with a giant bank they do not generally want to have a live person make a decision for you. They don't really have the manpower or inclination to decide whether Bob gets a 200$ increase or whether you get your 10000$ loan to start a pizza shop with a basement. They want to run everything thru an algorithm based on current regulations and base the decision on that.

Smaller banks are different. Since they normally service local communities they rely more on face to face interactions as well as judgement calls based on the persons history with the community. Instituting a system with far less regulations makes sense for them. This also creates a unique market for them of customers who literally cannot do business with giant banks due to regulations but can do business with them increasing their market share.

Why Small Banks?

Smaller banks need to be encouraged and protected instead of systematically eliminated under Dodd-Frank. Smaller banks have a significantly lower default rate on loans and they make significantly more loans to start-up businesses. 33% of business loans come from small banks while only 23% come from giant banks. Having the assets of the banking industry spread out over more sources reduces the risk of any single one of them causing a crash and needing to be bailed out.

We finally have legislation that will help fix the banking industry and Republicans are to shy to explain it to the public.

Tsuke, your posts have been pretty darn good for a rookie. I'm glad you joined this forum

glad to be here

 

[occupied]

What else is in this Dodd-Frank replacement? You seem to have focused on one part but we all know a bunch of Goldman-Sachs slimes wrote this thing and Republicans are just going pass it without reading it. I'm not savvy enough to decrypt the complex language this thing is undoubtedly written in so come back and tell us if it would prevent another situation like we had in 2008 and why. I do not really give a damn how many small banks there are but I do care if my business collapses again.

 

[tsuke]

What else is in this Dodd-Frank replacement? You seem to have focused on one part but we all know a bunch of Goldman-Sachs slimes wrote this thing and Republicans are just going pass it without reading it. I'm not savvy enough to decrypt the complex language this thing is undoubtedly written in so come back and tell us if it would prevent another situation like we had in 2008 and why. I do not really give a damn how many small banks there are but I do care if my business collapses again.

the OP already points out why the republican choice act is a better fit for what people wanted to achieve because it sets two tiers of rules. One for banks who can meet an expanded reserve requirement (usually smaller banks) and one for banks that cant (usually big banks because they cant afford to let their profits drop)

Basically it lets small banks escape the regulation and compete with bigger ones.

You absolutely should care about small banks. Competition improves services. Before Dodd Frank 75% of banks offered free checking. After it only 39% did.

Let me ask you a question. Is the banking system safer now from banks that are too big too fail before Dodd-frank when they controlled 11% of the industry or after when they control nearly half the industry?

 

[occupied]

What else is in this Dodd-Frank replacement? You seem to have focused on one part but we all know a bunch of Goldman-Sachs slimes wrote this thing and Republicans are just going pass it without reading it. I'm not savvy enough to decrypt the complex language this thing is undoubtedly written in so come back and tell us if it would prevent another situation like we had in 2008 and why. I do not really give a damn how many small banks there are but I do care if my business collapses again.

the OP already points out why the republican choice act is a better fit for what people wanted to achieve because it sets two tiers of rules. One for banks who can meet an expanded reserve requirement (usually smaller banks) and one for banks that cant (usually big banks because they cant afford to let their profits drop)

Basically it lets small banks escape the regulation and compete with bigger ones.

You absolutely should care about small banks. Competition improves services. Before Dodd Frank 75% of banks offered free checking. After it only 39% did.

Let me ask you a question. Is the banking system safer now from banks that are too big too fail before Dodd-frank when they controlled 11% of the industry or after when they control nearly half the industry?

I was asking you. We both know that the big banks increased their market share dramatically because they were the only ones who had the funds to buy failing smaller banks, that was because of the bailout rather than Dodd-Frank. All this time we have heard that the post great recession banking regs were practically toothless, a band-aid on a hemorrhage, but congress wants to kill them or a least water them down further. My question to you is still does this thing congress is voting on make another 2008 recession more unlikely than it is now? If not why bother? The crash was not caused by there simply being big banks, it was big banks thinking they could be reckless with depositors money and get away with it.

 

[jwoodie]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

 

[occupied]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

Let's all actually remember that this was part of the narrative going around so you people would run political cover for the banks at a time they truly feared being broken up. People like you are the reason white collar criminals are so difficult to prosecute. What the hell did the big banks ever do for you that you feel compelled to defend them?

 

[tsuke]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

i dont seem to have the option to thank this post but this was spot on.

 

[tsuke]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

Let's all actually remember that this was part of the narrative going around so you people would run political cover for the banks at a time they truly feared being broken up. People like you are the reason white collar criminals are so difficult to prosecute. What the hell did the big banks ever do for you that you feel compelled to defend them?

It is actually Democrats who defend them by championing laws that kill all their opposition.

 

[occupied]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

Let's all actually remember that this was part of the narrative going around so you people would run political cover for the banks at a time they truly feared being broken up. People like you are the reason white collar criminals are so difficult to prosecute. What the hell did the big banks ever do for you that you feel compelled to defend them?

It is actually Democrats who defend them by championing laws that kill all their opposition.

You were doing good and then you dump a blanket partisan statement like that. I have one of my own. Republicans are ideologically opposed to banking regulation even when it makes sense and is clearly needed and hardly lift a finger to enforce the ones we have. When Republicans rule, the banks know that they cannot do anything so wrong that a republican regulator would crack down on them. Bankers should never feel that they are above the law, ever.

 

[Borillar]

Let's remember why "Dodd-Frank" was passed in the first place. It was not to correct some problem in the banking system that led to the financial meltdown. Instead, it was a fraudulent attempt to cover up the misdeeds of two of the worst financial criminals in U.S. history: Senator Christopher Dodds (D-CT) and Rep. Barney Frank (D-MA).

These two were the biggest proponents of Community Reinvestment Act, which required banks to make "sub-prime" home loans to unqualified applicants. Even when faced with the unsustainable housing bubble that this Act created, they refused to allowed any modifications to curb these loans. This led to the inevitable housing crash in 2008, which forced thousands of banks into insolvency and virtually ceased lending of any kind.

In order to cover up their responsibility for this debacle, Dodd and Frank created a false narrative that the resulting financial meltdown was due to "Wall Street Greed" rather than their own actions. They then introduced a bill which placed the blame on banks and placed strict controls on their lending practices. This actually made banking in this country less efficient and contributed to the anemic economic recovery we have had during the past eight years.

Dodd and Frank chose not to seek reelection after their misdeeds were exposed, but we have had to live with the lingering effects due to their duplicity. It is time to repeal this deceptive bill as soon as possible.

i dont seem to have the option to thank this post but this was spot on.

I remember Bush pushing lax lending requirements early in his presidency so he could have his "ownership society."