On August 6, during the first Republican presidential debate, Sen. Marco Rubio (R-FL) stated that the Dodd-Frank Wall Street Reform and Consumer Protection Act needed to be repealed. Rubio claimed that “over 40 percent of small and mid-size banks that loan money to small businesses have been wiped out since Dodd-Frank has passed.”
A number of fact-checking groups have claimed that Rubio got his numbers wrong. One such source concludes that Rubio’s figure is overstated and that the decline since 2010, the time frame given by Rubio, is about 16 percent or less than half of what he stated. Moreover, the decline may be due to factors other than Dodd-Frank.
Despite their disagreement on Dodd-Frank’s culpability for the decline in the number of small community banks, none of the other candidates participating in the debate backed Rubio’s call to repeal the law.
Dodd-Frank was billed as a safeguard against another financial crisis. The Obama Administration called it “the most far reaching Wall Street reform in history.” Many of its regulations specifically target big banks. Nonetheless, many believe that small banks were adversely impacted by the law.
Others claim, however, that the number of banks actually began to dwindle in the 1980s, decades before Rubio’s time frame and Dodd-Frank’s enactment. Governmental reports suggest that much of the loss comes from consolidation, not closures. In other words, banks were not necessarily collapsing, but rather were folding into other banks. There simply seems to be no real consensus as to how Dodd-Frank plays into this decline.
At this point, Rubio seems to be the only presidential candidate who explicitly has gone on record as calling for Dodd-Frank’s repeal. Whether other presidential candidates will push for a reform of the law or a complete overhaul or repeal will, no doubt, be a key topic as the presidential campaign heats up. It also will be interesting to see the extent to which the possible repeal of Dodd-Frank becomes a defining issue in the next Republican presidential primary election.
It bears noting that this coming Saturday, August 22, marks the 75th anniversary of the enactment of the Investment Company Act of 1940 and the Investment Advisers Act of 1940, two acts which, although substantially amended over the last three-quarters of a century, have withstood the test of time. At the same time, there is no certainty Dodd-Frank will enjoy the same degree of longevity. In fact, which party and which candidates win the next general elections may well determine whether the Dodd-Frank Act survives even a decade.