Financial Reform Watch

Published — June 16, 2011 Updated — May 19, 2014 at 12:19 pm ET

Reform reading: Big banks adopt new rallying cry that Dodd-Frank is anti-competitive

A Morgan Stanley billboard displayed in Times Square, New York. Seth Wenig/The Associated Press

Law will squeeze bank profits from derivatives trading, debit cards


A daily round-up of commentary, analysis and news about the Dodd-Frank financial reform law.

Anti-competitive? – Wall Street has seized upon a new argument to fight new regulations required by Dodd-Frank: Tougher rules will weaken banks and hurt the U.S. economy.

The reform law requires changes in some of the banking industry’s biggest profit centers such as derivatives trading and debit card fees, reports the New York Times’ Dealbook. JPMorgan Chase & Co., Morgan Stanley and other big banks are complaining that the new regulations mean they will lose customers to European competitors which have less-stringent regulations.

The European Commission is not expected to take up stricter derivatives rules until 2012 or later, while the Commodity Futures Trading Commission plans to finalize its derivatives rules by the end of this year.

Cost-benefit analyses requested Senate Republicans are demanding that regulators carefully analyze the economic impact of dozens of Dodd-Frank rules to determine how much they will cost banks and Wall Street, reports Reuters.

Concerned that regulators have emphasized speed over deliberation in rule-writing, Republicans on the Senate Banking Committee plan in-depth briefings with the internal watchdogs of the Commodity Futures Trading Commission, the Securities and Exchange Commission, the Federal Reserve and other regulators. Earlier this year, the CFTC inspector general released a report saying that agency rushed to meet arbitrary deadlines, and failed to conduct a sufficient cost-benefit analysis for four proposed derivatives rules.

Credit unions want cap lifted – Credit unions today asked a Senate panel to lift restrictions on their ability to make loans to small businesses, which they say are still suffering from the after effects of the financial crisis.

Most credit unions face a cap on business lending that is based on a percentage of their total assets. National Credit Union Administration Chairman Debbie Matz told the Senate Banking Committee that while only about 300 credit unions are close to hitting this limit, about 2,000 would increase business lending if the cap was raised. Rival banks oppose changing the cap.

Toss Dodd-Frank and impose 14 percent capital standards – The Dodd-Frank Act should be repealed and replaced with a simple and cheap solution: double bank capital standards to 14 percent, a Wall Street Journal editorial says.

The “2,300 pages of insufficiency and misallocated credit known as Dodd-Frank” will cost banks tens of billions of dollars and amounts to intrusive micromanagement, the editorial said. It recommends dumping Dodd-Frank and adopting Federal Reserve Gov. Daniel Tarullo’s recent suggestion to require banks to hold much more capital and thereby increase their ability to absorb potential losses.

Read more in Inequality, Opportunity and Poverty

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