Phil Mattingly of Bloomberg Businessweek has confirmed something I’ve heard from well-informed insiders: it is exceedingly unlikely that the law will be repealed, in part because Senate Democrats will almost certainly be able to prevent outright repeal. Rather, various sections of the law will be revised, reformed, and rolled back, while the broad discretion it grants federal regulators will be deployed differently than under a Democratic administration — more favorably towards the interests of America’s largest financial institutions, according to Mattingly. The overall impression left by the article is sobering:
Even bank executives who’ve complained the 2010 law is too intrusive recognize it’s not in their best interest to come out for reversing it, given the public’s persistent anger at Wall Street for its role in wrecking the economy. Outwardly, Goldman Sachs (GS) Chief Executive Officer Lloyd Blankfein and JPMorgan Chase (JPM) CEO Jamie Dimon pledged broad support for the law, leaving their lobbyists and lawyers to fight behind the scenes to weaken it. “If I could push a button and eliminate Dodd-Frank, would I do it? No, I would not,” Blankfein told an audience at the Economic Club of Washington in July. Still, he said, there are “some parts that go too far.”
Wall Street wants to loosen rules governing the swaps market, which generated $7 billion in revenue in the first quarter of 2012, according to government records. The banks would also get rid of restrictions on bank investment in private equity and hedge funds, pare back the power of the new federal consumer protection agency, and block the Volcker Rule, which bars banks from trading with money from their own accounts, a practice that can put customer deposits at risk. It’s no mystery why bankers long to rid themselves of these restrictions: The eight largest U.S. banks stand to lose between $22 billion and $34 billion in annual revenue as a result of Dodd-Frank, according to Matthew Albrecht, a credit analyst with Standard & Poor’s (MHP).
I would add that many of the bank executives who’ve complained about the 2010 law also understand that it favors incumbents over new entrants, particularly incumbents with the legal acumen and lobbying resources to shape the emerging regulatory regime. My strong preference, very much in line with conservative and libertarian sensibilities, would be for a financial reform that would aim to facilitate rather than stymie entry.