RNC: Dodd-Frank: A Year Of Uncertainty

Obama Said Dodd-Frank Would Deliver Certainty But What It Means For Taxpayers Is More Bailouts, More Uncertainty And Less Growth

WASHINGTON, July 21, 2011 /PRNewswire-USNewswire/ -- The following was released today by the Republican National Committee:

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OBAMA SAID DODD-FRANK WOULD PROVIDE "CERTAINTY TO EVERYONE" BUT BUSINESSES ARE OPERATING IN "AN ENVIRONMENT OF REGULATORY UNCERTAINTY"

PROMISE: President Obama Said That Dodd-Frank "Provides Certainty To Everyone From Bankers To Famers To Business Owners To Consumers." "It provides certainty to everyone from bankers to farmers to business owners to consumers. And unless your business model depends on cutting corners or bilking your customers, you have nothing to fear from this reform." (President Barack Obama, Remarks By The President On The Passage Of Financial Regulatory Reform, Washington D.C., 7/15/10)

REALITY: Dodd-Frank "Will Unleash The Biggest Wave Of New Federal Financial Rule-Making In Three Generations." "Yet Dodd-Frank, with its 2,300 pages, will unleash the biggest wave of new federal financial rule-making in three generations. Whatever else this will do, it will not make lending cheaper or credit more readily available." (Editorial, "The Uncertainty Principle," The Wall Street Journal, 7/14/10)

• "[Lawyers] Needed 26 Pages Of Flow Charts Merely To Illustrate The Timeline For Implementing The New Rules, The Last Of Which Will Be Phased In After A Mere 12 Years." (Editorial, "The Uncertainty Principle," The Wall Street Journal, 7/14/10)
• See The "26 Pages Of Flow Charts"

Due To The Intense Period Of Rule-Making "Market Participants Will Need To Make Strategic Decisions In An Environment Of Regulatory Uncertainty." "U.S. financial regulators will enter an intense period of rulemaking over the next 6 to 18 months, and market participants will need to make strategic decisions in an environment of regulatory uncertainty." ("Summary Of The Dodd-Frank Wall Street Reform And Consumer Protection Act, Enacted Into Law On July 21, 2010," Davis Polk & Wardwell LLP, 7/21/10)

• "The Legislation Is Complicated And Contains Substantial Ambiguities, Many Of Which Will Not Be Resolved Until Regulations Are Adopted ..." "The legislation is complicated and contains substantial ambiguities, many of which will not be resolved until regulations are adopted, and even then, many questions are likely to persist that will require consultation with the staffs of the various agencies involved." ("Summary Of The Dodd-Frank Wall Street Reform And Consumer Protection Act, Enacted Into Law On July 21, 2010," Davis Polk & Wardwell LLP, 7/21/10)

Harvard Finance Professor Hal Scott: "This Massive Revamp Of American Regulation Creates Uncertainty For Now, And, With Basel III, Significant Costs In The Future, With Uncertain Benefit." (Hal Scott, Op-Ed, "Little To Celebrate On Dodd-Frank's Birthday," Financial Times, 7/19/11)

OBAMA SAID THAT DODD-FRANK WOULD MAKE THE ECONOMY "STRONGER" BUT IT HAS HAMPERED BUSINESSES AND MAIN STREET WITH RULES AND HIGHER COSTS

PROMISE: Obama Said That Dodd-Frank Was Part Of Building "An Economy That Is Stronger And More Prosperous." "Along with the steps we're taking to spur innovation, encourage hiring, and rein in our deficits, this is how we're ultimately going to build an economy that is stronger and more prosperous than it was before and one that provides opportunity for all Americans." (President Barack Obama, Remarks By The President At Signing Of Dodd-Frank Wall Street Reform And Consumer Protection Act, Washington D.C., 7/21/10)

REALITY: "To Date, The Total Estimated Compliance Costs From Dodd-Frank Remained At $1.26 Billion, But Of The 140 Major Rulemakings, Only 26 Contain Quantified Cost Estimates." (Sam Batkins, "The Week In Regulation: July 5-8, 2011," American Action Network, 7/8/11)

"The Rules Have Changed So Many Times ... If You're Not On Top Of All The Issues It's Very, Very Difficult To Stay In Business Today." "[Mike] McHugh, president and chief executive officer of Continental Home Loans Inc. in Melville, New York, is about to endure even more change as the Dodd-Frank Act, designed to prevent another mortgage-fueled frenzy like the one that led to the 2008 credit crisis, kicks in this summer. 'The rules have been changed so many times,' McHugh said. 'If you're not on top of all the issues it's very, very difficult to stay in business today.'" (Lorraine Woellert and Carter Dougherty, "Dodd-Frank Rules Make Mortgages Less Profitable: One Year Later," Bloomberg, 7/12/11)

"But It's The Derivatives Portion—The Part Of The Bill Aimed Directly At Wall Street—That Might End Up Touching Most Lives In Rural America." (Michael M. Phillips, "Finance Overhaul Casts Long Shadow On The Plains," The Wall Street Journal, 7/13/10)

• Derivatives Reform Could Make Hedging More Expensive For Farmers Since "New Requirements On Big Players Will Create Higher Costs For Small Players." "The question for these farmers is whether such rules will make hedging more expensive. Some say new requirements on big players will create higher costs for small players, including the cash dealers will have to put aside to enter into private derivatives transactions. Some brokers think restrictions on big-money banks and investors will drain the amount of money available to the everyday deals farmers favor." (Michael M. Phillips, "Finance Overhaul Casts Long Shadow On The Plains," The Wall Street Journal, 7/13/10)

PRESIDENT OBAMA SAID THAT DODD-FRANK WOULD GUARANTEE "NO MORE TAXPAYER-FUNDED BAILOUTS – PERIOD" BUT THEY ARE "STILL POSSIBLE"

PROMISE: President Obama Said That Dodd-Frank Assured That "There Will Be No More Taxpayer-Funded Bailouts – Period." "Because Of This Reform, The American People Will Never Again Be Asked To Foot The Bill For Wall Street's Mistakes.  There Will Be No More Taxpayer-Funded Bailouts -- Period." (President Barack Obama, Remarks By The President On The Passage Of Financial Regulatory Reform, Washington D.C., 7/15/10)

REALITY: Standard & Poor's Says That Despite Dodd-Frank, Future Taxpayer Bailouts Of Systematically Important Financial Institutions Is "Still Possible." "Standard & Poor's Ratings Services believes that the primary goal of DFA is to make banks less risky and better capitalized so the need for extraordinary support is reduced. However, given the importance of confidence sensitivity in the effective functioning of banks, we believe that under certain circumstances and with selected systemically important financial institutions (SIFI), future extraordinary government support is still possible." ("The U.S. Government Says Support For Banks Will Be Different 'Next Time' – But Will It?," Standard & Poor's, 7/12/11)

Federal Reserve Chair Ben Bernanke Says That Too-Big-To-Fail Institutions Could Still Receive Taxpayer Bailouts From The Treasury. "As bad as this news is for taxpayers, the potentially worse news came when Mr. Hennessey asked if, in times of crisis, the government could still assist a particular company now that Dodd-Frank reform is the law of the land. Mr. Bernanke quickly put the matter to rest by noting that a too-big-to-fail company undergoing the government's new resolution process could still receive money from the Treasury. Uh, oh."  (Editorial, "The Diviner of Systemic Risk," The Wall Street Journal, 9/4/10)

A Product Of The RNC Research Department

July 21, 2011

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