Has your bank raised its fees or stopped offering free checking accounts in the last couple of years? If so, you can thank the regulatory boondoggle that is the Dodd-Frank financial law.

Since its passage two years ago tomorrow, the number of large banks that offer free checking has declined sharply. In 2009, 96 percent of them offered free checking, but just 34.6 percent did in 2011.

Senator Chris Dodd (D-CT) and Representative Barney Frank (D-MA) argued that their namesake would save America from another financial crisis—but most of the law’s provisions have little or no connection to the most recent crisis.

For example, Dodd–Frank does not end bailouts and taxpayer support for big banks. Under the act, the Federal Deposit Insurance Corporation (FDIC) is permitted to purchase the assets of a failing firm, guarantee the obligations of a failing firm, take a security interest in the assets of a failing firm, and borrow on the failed firm’s total consolidated assets. (For Bank of America, that would be $2 trillion in bailout authority to be paid by taxpayers.)

Congress has proven, in fact, that it grossly misdiagnosed the factors responsible for the financial crisis, while ignoring primary culprits such as Fannie Mae and Freddie Mac. But in its haste to appear relevant and on top of things, Congress has unleashed a staggering amount of new regulations that are actually harming—not helping—the economy.

There’s a reason the financial regulation law has been called “Dodd-Frankenstein.” This monstrous creation will swell the ranks of regulators by 2,849 new positions, according to the Government Accountability Office. It created yet another new bureaucracy called the Consumer Financial Protection Bureau (CFPB) that has truly unparalleled powers.

This new bureau is supposed to regulate credit and debit cards, mortgages, student loans, savings and checking accounts, and most every other consumer financial product and service. And it’s not even subject to congressional oversight.

Frighteningly, the CFPB’s regulatory authority is just as vague as it is vast. More than half of the regulatory provisions in Dodd–Frank state that agencies “may” issue rules or shall issue rules as they “determine are necessary and appropriate.” This means, as The Economist put it, “Like the Hydra of Greek myth, Dodd-Frank can grow new heads as needed.”

Congress avoided making real law here and passed the responsibility for “fixing” the financial sector to these newly minted bureaucrats. And that hasn’t been going too well.

As Heritage’s Diane Katz explains in a two-year checkup of the law:

As of July 2, 63 percent of the deadlines have been missed, which has intensified the cloud of uncertainty enveloping the finance sector—and the economy—since passage of the act. Thousands of businesses do not know what the government demands they do differently or when they must do it.

The results of this haphazard regulation are dire, Katz says, because “consumers will experience tight credit, higher fees, and fewer service innovations. Job creation will suffer.” She adds that “financial firms of all sizes are shelling out hundreds of millions of dollars for regulatory compliance officers and attorneys rather than making loans for new homes and businesses.”

So the law that was supposed to fix the financial sector—and created something called the Consumer Financial Protection Bureau—is hurting consumers rather than “protecting” them. Congress should repeal Dodd-Frank before it can do any more damage.

See our Dodd-Frank Fact Sheet 


Special Note: The thoughts and prayers of The Heritage Foundation are with the victims, families and people of Aurora, Colorado this morning following last night’s senseless tragedy. May God bless them.

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