The Dodd-Frank financial reform Act is a bill with the best intentions filled with harmful unintended consequences. The bill was simply not thought through well enough and the effects on market have been less then stellar. While many parts both of Dodd-Frank and the CARD Act address real problems in the financial system many of the new policies have strong negative effects on consumers.
The new standards under Dodd-Frank and the CARD Act make it more difficult for credit card companies to manage the risk they take on with each line of credit. Popular as they may be in some circles, these actions are unwise. Not allowing credit companies to charge rates and operate in a manner commensurate to their level of risk increases the likelihood of collapse and an even deeper financial crisis.
Increased regulation and restrictions on fees will inevitably increase the overall cost of providing credit, reduce consumer benefits, and even increase some of the costs the regulations are designed to minimize. Fortunately, the shift of power in Congress could be bringing changes to the regulations enacted under Dodd-Frank. In a document distributed by Chairman Spencer Bachus of Alabama, Bachus outlined the committees new goals of eliminating the unintended negative consequences of Dodd-Frank.
The 20-page document, circulated to committee members and staff for comment by Chairman Spencer Bachus of Alabama, says that the panel will focus this year on overseeing implementation of Dodd-Frank’s new rules for Wall Street. A copy of the draft oversight plan was obtained by Bloomberg News.
Committee members will monitor regulators who are writing language to enforce the so-called Volcker rule limiting proprietary trading by banks to “ensure that it does not result in unintended consequences” for jobs and markets, according to the draft. The panel also will “examine whether federal regulators will impose margin and capital requirements” on non- financial firms that use derivatives to hedge legitimate business risk.
“The committee will assess the results of the implementation of the Dodd-Frank Act to improve those parts of the act that work well while changing those parts that do not,” according to the proposal. The panel will “identify and remedy unintended consequences.”
Many consumers and financial companies have been hoping for a change in where financial reform is headed in the new Congress, and this new shift in focus from the House Financial Services Committee could be a step in the right direction.