Biden highlights Dodd-Frank’s withdrawal in calls for tighter banking regulations
President Biden called for tighter banking regulations as the fallout from the collapse of Silicon Valley Bank and Signature Bank shakes US financial markets. The bank failures are the second and third largest in US history, respectively, after the collapse of Washington Mutual in 2008.
In his address on Monday, President Biden highlighted the partial repeal of the Dodd-Frank Act in 2018. Passed in the aftermath of the 2008 financial crisis, the Dodd-Frank Act was designed to counter financial excesses and controversial lending practices that have contributed to the crisis. The legislation aimed to crack down on practices such as subprime mortgage lending and strengthen regulators’ oversight of the financial system.
The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC) to monitor the activities of major banks deemed “too big to fail” and to break down or break down banks that pose systemic risk to the U.S. economy. to liquidate. The Dodd-Frank Act also established the Consumer Financial Protection Bureau (CFPB), charged with preventing predatory and subprime mortgage lending, and the Volcker Rule, which prohibits banks from engaging in the riskiest trading activities.
Critics of the Dodd-Frank Act have argued that its requirements place an unnecessary burden on smaller community and regional banks. In 2018, parts of the Dodd-Frank Act were repealed to relax regulations on them by raising the required asset threshold for stress testing and exempting banks with assets less than $10 billion from the Volcker Rule. However, the recent turmoil in the banking sector could lead Congress to consider new legislation to more extensively regulate the banking sector.