Banking restrictions imposed by the 2010 Dodd-Frank financial reform law have caused big problems for banks nationwide, a new report from the Competitive Enterprise Institute explains. In fact, Dodd-Frank’s “Volcker Rule,” which prohibits most commercial banks from certain types of trading and investing, negatively impacts everyone in the financial system, from banks and investors to small businesses and consumers. The House-passed Financial CHOICE Act would repeal the Volcker Rule, but the Senate in November announced a watered-down reform plan in the works.
“Volcker Rule restrictions and red tape punish smaller banks and make it harder and more expensive for small businesses to get loans,” said Daniel Press, co-author of the report and a CEI policy analyst. “Congress should make it a priority to roll back needless and harmful restrictions on Main Street banks by getting rid of the Volcker Rule.”
The report argues that a better way to deal with system-wide risk posed by banks is for Congress to get rid of the Volcker Rule and government guarantees that shift risk from banks to taxpayers such as guarantees for bank deposits.
“Centralized, bureaucratic control of risk failed to prevent the 2008 financial crisis, and there is little reason to believe it will prevent the next one,” explained report co-author and Senior Fellow John Berlau. “Congress should make sure banks and other financial institutions, not taxpayers, are the ones responsible for the investments and loans they undertake.”