Page 25 - ARUBA TODAY

BUSINESS Monday 6 February 2017
A25

Wall St. lending to Main St. even as many decry Dodd-Frank

KEN SWEET bubble soon to burst. Mort-
AP Business Writer gages rates have been
NEW YORK (AP) — President near historic lows for years.
Donald Trump has wasted (One notable exception:
little time in beginning a Home equity loans, popular
push to reverse the stricter during the housing bubble,
banking regulations enact- have declined since 2009.)
ed after the 2008 financial “The argument that Dodd-
crisis. Trump has branded Frank choked the lending
the Dodd-Frank Act “a markets is simply not in the
disaster” — a regulatory data,” said Mike Konczal,
overreach that slowed the a fellow at the left-leaning
economy and stifled lend- Roosevelt Institute.
ing to consumers and busi- Even the most vulner-
nesses. able Americans have re-
Dodd-Frank did impose entered the financial sys-
tighter curbs on U.S. banks tem. Roughly 7 percent of
and how they operate. Americans were unbanked
And the restrictions fell par- in 2015, down from 8.2 per-
ticularly hard on commu- cent in 2011, according to
nity banks. Yet it’s also true the Federal Deposit Insur-
that by just about every ance Corporation. (The
measure, the U.S. economy A television screen on the floor of the New York Stock Exchange shows the rate decision of the unbanked are people who
is healthier now: The job Federal Reserve, Wednesday, Feb. 1, 2017. have no bank account
market is solid. The hous- (AP Photo/Richard Drew) and are considered largely
ing market has largely re- shut out of the mainstream
bounded. And the banking is, that they would require sis. Yet not until another to get. Yet for most peo- financial system.)
system, which nearly col- another taxpayer bailout crisis actually hits will it be ple, those days are largely
lapsed at the height of the in case of a new financial clear whether Dodd-Frank gone. The banking industry Q: What about lending to
crisis, is safer and sturdier. crisis because their col- works as well as its sup- is making more loans in var- small businesses?
The Dodd-Frank Act took lapse would threaten the porters claim. And no one ious forms. And Americans, A: sharp pullback in busi-
effect in 2010, a response entire banking system. Take knows for sure whether the who drastically pared their ness loans followed the
to reckless risk-taking by the bankruptcy of Lehman law has caused the econ- debt during the recession, Great Recession and the
banks that inflated a hous- Brothers, once a storied Wall omy to grow more slowly are borrowing again. passage of Dodd-Frank. But
ing bubble, kindled the Street investment bank. Its than it otherwise would. Americans have $992 billion lending to small business-
financial crisis and eventu- bankruptcy at a precarious in balances on their credit es soon recovered. And just
ally required a $700 billion moment for the banking Q: Has Dodd-Frank made it cards, near a record high like U.S. shoppers, business-
taxpayer bailout. The law system helped ignite a full- harder for people to buy a set in 2008, according to es large and small are bor-
was designed, most broad- blown crisis. Once Lehman home or car, or to borrow? data from the Federal Re- rowing at high levels again.
ly, to guard against anoth- failed, the government felt A: The law did restrict cer- serve. Auto loans outstand- Companies have bor-
er catastrophe. compelled to rescue other tain risky mortgages and ing total $1.10 trillion, also a rowed over $1.1 trillion in
But Republicans in Con- financial giants that were reined in other types of record. And the average commercial and industrial
gress, emboldened Wall deemed too important to lending that had previously rate on those auto loans is loans from the big banks
Street lobbyists and the the whole system. Dodd- faced little or no regulation. just below 4.5 percent, near as of December 2016, a
Trump White House argue Frank required the banks But Americans, speaking a record low. record high, according
that the law went too far to hold much more money broadly, have ample ac- What’s more, mortgage to the Fed. Even among
and want to roll back many relative to how much they cess to credit. Immediately debt has reached $14.2 small banks, business loans
of the regulations. Just as lend. It created the Con- after the financial crisis, trillion, not far below the re- totaled $573 billion as of
vociferously, defenders of sumer Financial Protec- banks scaled way back on cord set in mid-2008, when December, also a record
Dodd-Frank say it remains a tion Bureau, which aims to lending. Loans were harder the housing market was in a high.q
critically important bulwark protect consumers from
against excessive financial abusive financial products.
risk-taking and should stay Large banks had to prove
intact. “The Dodd-Frank they could survive a hypo-
Act is a disastrous policy thetical financial crisis or a
that’s hindering our mar- deep recession. And they
kets, reducing the avail- had to devise plans to dis-
ability of credit and crip- mantle themselves in an
pling our economy’s ability orderly fashion if they ever
to grow and create jobs,” had to seek bankruptcy.
Sean Spicer, Trump’s press
secretary, said Friday. Q: So has Dodd-Frank
Here’s a closer look at the worked?
law and what’s at stake: A: The balance sheets of
the nation’s biggest banks
are far more robust than
Q: What does Dodd-Frank
really do? before the crisis and more
A: It’s a complicated law. prepared to endure finan-
But among other goals, it cial setbacks. And most
had one overarching pur- analysts say the restrictions
pose: To erase any percep- imposed by Dodd-Frank
tion that some mega-banks largely worked as a safe-
were “too big to fail” — that guard against another cri-