Q: I know Congress is trying to repeal Dodd-Frank. What effect do you think that would have on the brokerage business?

A: I’m oversimplifying things somewhat but, as I see it, the Dodd-Frank Wall Street Reform and Consumer Protection Act didn’t really do anything by itself. In general Dodd-Frank simply told regulatory agencies to come up with rules to address various problems that came to light during the 2008 financial crisis.

The president’s memo lays out a framework for the Department of Labor to rescind the fiduciary rule. (Bloomberg News)
The president’s memo lays out a framework for the Department of Labor to rescind the fiduciary rule. (Bloomberg News)

Repealing Dodd-Frank doesn’t change the fact that those agencies established new rules and revised existing ones, nor will its repeal make those rules suddenly disappear. It is, however, a first step towards reversing those rules. Whether for good or ill, that job is likely to be a long, drawn-out affair.

More significantly, if the repeal is passed, the president would have the power to fire directors of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, and the Consumer Financial Protection Bureau, an agency created by Dodd-Frank with the mission of protecting consumers in the financial sector.

Repeal would also give Congress the authority over the CFPB's budget, meaning that Congress could defund the agency.

Repealing Dodd-Frank would also eliminate Dodd-Frank's orderly liquidation authority, which gives the FDIC the power to step in and prevent a domino effect if a major financial institution fails (as Bear Stearns and Lehman Brothers did during the 2008 crisis).

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