Possible Avenues for Reforming Dodd-Frank

The election of Donald Trump and Republican control of Congress has led to expectations of significant changes to the Dodd-Frank Act (Dodd-Frank). However, according to a recent American Banker article, obstacles to the wholesale repeal of Dodd-Frank would mean that Republicans will need to be creative in their approach to reform. Some avenues outlined in the article include new approaches to enforcement by Trump appointees, use of the Congressional Review act, and a process known as "reconciliation".

The article begins by outlining that new leadership at financial regulatory agencies may be the quickest way for Republicans to provide financial regulatory relief. Many of President-Elect Trump's nominees for these positions will not face the risk of filibuster during their Senate confirmation processes. Once in place, the new heads of these regulatory bodies can quickly change the direction of many agencies.

Additionally, Republicans in Congress may be able to use powers provided under the Congressional Review act to undo some of the rules promulgated under Dodd-Frank. The act allows Congress the power to overturn a federal agency rule that was completed within the past 60 legislative days. However the limitations of this authority mean that "most major Dodd-Frank rulemakings, including those governing capital standards, the Volcker Rule, and new mortgage disclosures" cannot be undone through the act. In addition, under current law, each such rule must be considered individually.

Another approach may involve a legislative tool in the federal budget process known as reconciliation. Changes made through reconciliation "must have a demonstrated budgetary impact, but are not subject to the filibuster." This may provide Republicans in Congress the opportunity to make changes to several major provisions of Dodd-Frank. These include "big-bank resolutions, as well as the creation of the Financial Stability Oversight Council and the CFPB."

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