Magazine article American Banker

Want to Ease the Regulatory Burden? Reform Congress

Magazine article American Banker

Want to Ease the Regulatory Burden? Reform Congress

Article excerpt

Byline: William Aukamp

I have been laboring in the fields of banking law and regulation for more than 45 years and have made some observations along the way. First and foremost, banking is overregulated. The problem goes way beyond what Congress did with the Dodd-Frank Act.

Bankers have complained about the regulatory burden since long before financial crisis. The savings and loan crisis in the '80s and '90s resulted in an avalanche of rules and regulations. Banking regulation today is far more pervasive than it was back then.

And yet, the proposed solutions for dealing with the regulatory burden tend to be not much better than the unnecessary laws and rules enacted in the first place. Efforts at regulatory "reform" and regulatory "relief" often ignore the source of what led to the overregulation in the first place: Congress.

Let's start with the regulatory response to the 2008 crisis. Some advocates of bank deregulation believe the solution to the regulatory pendulum being out of balance is to repeal Dodd-Frank.

To be clear, some of Dodd-Frank's provisions should be repealed. For example, some of its amendments to the Truth in Lending Act add unnecessarily to the regulatory burden, especially with respect to residential mortgage transactions. The TILA law, as originally enacted made sense and was clear and understandable, but multiple amendments over the years have added needless complexity.

But relying on a Dodd-Frank repeal has immediate problems. First, it is unlikely to happen given the political breakdown of Congress right now, and No. 2, even if Congress were able to repeal the 2010 law, that would still not address the unnecessary regulatory burden that had been disrupting banking before the 2008 crisis.

Meanwhile, the Trump administration has tried to address the regulatory burden independently of any Dodd-Frank repeal efforts with executive orders intended to lean on the regulatory agencies to roll back policies through their implementing authority. But these executive orders overlook the deliberative nature of the regulatory agencies' rulemaking process.

Among the steps that the administration has called for are having the regulatory agencies repeal two existing rules for every new rule issued. But that is simplistic and reveals a lack of understanding of how regulations are normally created and repealed. Similarly, President Trump's call for agencies to create a task force to identify unnecessary regulations did not include the criteria to be followed for making such determinations. …

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