It’s been 10 years since investment bank Lehman Brothers filed for bankruptcy as of September 15, marking the epicenter of the infamous 2008 financial crisis. In its wake, Congress passed the Dodd–Frank Wall Street Reform and Consumer Protection Act. But are we any better protected from another financial collapse? CEI financial policy experts say no, unfortunately.
John Berlau, CEI senior fellow:
“Not only did Dodd-Frank’s not ‘cure’ the diseases that led to the financial crisis, it took its own toll on the health of the American financial system. The law’s mandates have proven most burdensome to trusted community banks and credit unions that had nothing to do with the reckless lending that led to the financial crisis.
“Further, Dodd-Frank and other red tape discouraged the formation of new banks to provide much-needed competition and responsible innovation. Congress and U.S. regulators must repeal red tape that played a major role in the anemic growth that followed the financial crisis.”
Daniel Press, CEI policy analyst:
“Ten years ago, the United States plunged into a financial crisis that would bring the world economy to the brink of collapse. It may surprise many Americans to know the real causes of the crisis remain present today. If anything, the policies that led to the inflation of the housing bubble, namely Fannie Mae and Freddie Mac, the two big ‘Government-Sponsored Enterprises’ (GSEs), remain as big as ever.
“Leading up to the crisis, the federal government was holding over three-quarters of all subprime mortgages on its books. Today, taxpayers continue to back as much mortgage debt as they did during the crisis. The continued dominance of the GSEs remains a threat to the stability of the financial system. Congress and the Trump Administration must end the government’s stranglehold over the housing system in order to prevent another crisis.”
A Bird in the Hand and No Banks in the Bush: Firms only become Too Big to Fail when there is a lack of competition from new entrants.
Nine Years on from the Financial Crisis and We're No Safer: “Ending the government’s stranglehold over the financial system is imperative to preventing the next one.”
Dodd-Frank Is Hurting Those Who Had Nothing to Do With the Financial Crisis: “Dodd-Frank should be changed so it does more to prevent the next financial crisis and less to harm innocent investors, entrepreneurs and consumers.”
Wall St. attacked, Main St. wounded: “The 2008 financial crisis was a drastic shock to the American economy. But the regulatory response in the years that followed was just as powerful a shock to the financial system. Many of the rules issued because of Dodd-Frank have harmed the poorest in society, who have seen their insurance made more expensive, their banking choices reduced and their bank fees increased.”