How Easy Will It Be For Donald Trump to Dismantle Dodd-Frank?

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Donald Trump made it clear on the campaign trail that we need to dismantle Dodd-Frank. Now that he has been elected President, how easy will the reform process be?

Donald Trump made a lot of promises on the campaign trail, including vowing to dismantle the Dodd-Frank Wall Street Reform and Consumer Protection Act, one of the most defining legislations of the post-recession era. Following his election, many in the investing community are seeking to hold him accountable to that promise.

Dodd-Frank, which was signed into federal law by President Barack Obama in 2010, brought forth the biggest shift in U.S. financial regulation since the Great Recession. Dodd-Frank signaled many changes, including more stringent lending rules that have “made it impossible for bankers to function,” Trump said while campaigning earlier this year.

“It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop.”

When asked how he intended to reform the legislation, Trump replied, “it will be close to dismantling of Dodd-Frank.”[1]

As many observers note, dismantling Dodd-Frank in one fell swoop is easier said than done. While there is certainly a lot of political capital to be gained by proposing to kill the bill, Trump’s administration will likely find it much easier to gradually peel back the landmark reform than to tear it apart.

For starters, Dodd-Frank was the government’s principal response to the biggest financial crisis since the interbellum period. Rolling back such measures will prove costly and difficult to implement. Should Trump go down this route, what exactly will his goals be? How does he intend to accomplish them?

These are uncomfortable questions because the President-elect hasn’t elaborated on his plan to reform the bill. Going farther down this rabbit hole will also expose the fact that there are very few lawmakers who fully understand the legislation in the first place.[2] At a time when America’s economy is emerging from years of slow growth, there may be more political merit to attack other issues. As The Wall Street Journal has already noted, a full repeal of Dodd-Frank isn’t the main focus of Trump’s transition.[3]

Banks have been nothing short of euphoric over Trump’s election win, with the S&P 500’s financial index gaining nearly 20% since November 8. Trump’s proposed policies, which include everything from massive corporate tax cuts to equally large infrastructure spending, have sent the S&P 500, Dow Jones and Nasdaq to consecutive record highs. Banking, infrastructure, primary industry – virtually every sector has been drinking the Trump Kool Aid.

For financial services, the belief that Trump will roll back regulations has been at the center of the rally. Indeed, it is from this very sector that Trump is likely to garner the most support for reforming Dodd-Frank.

Critics of America’s largest banks (and there are many) don’t see a reason why they should be calling for Dodd-Frank to be repealed. In addition to fending off reckless lending practices, post-recession reforms haven’t hurt America’s lenders. The Big Four – JPMorgan Chase & Co, Citigroup Inc., Bank of America Corp and Wells Fargo & Co – now control roughly half of total bank assets.

Some experts argue that the size and reach of these financial institutions since the crisis is one of the main reasons why reform is needed. That’s because Dodd-Frank has made it more difficult for smaller companies to be competitive. This could be the proverbial low-hanging fruit Trump addresses if he is serious about reform. We’ll likely know more after the President-elect’s inauguration on January 20.

This article was written exclusively for GoRion.

[1] Reuters (May 18, 2016). “Donald Trump Says He Would Dismantle Dodd-Frank Wall Street Regulation.” Fortune.

[2] Jeff Cox (November 21, 2016). “Why it won’t be easy for Trump to repeal Dodd-Frank.” CNBC.

[3] Andrew Ackerman and Monica Langley (November 11, 2016). “Full Repeal of Dodd-Frank Isn’t Main Focus of Trump Transition.” The Wall Street Journal.

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This article has been exclusively written for GoRion by...

Sam Bourgi

Sam Bourgi

Sam Bourgi has more than seven years of progressive experience in economic analysis, market research, public policy and the financial markets. He has a broad expertise in the financial markets, including commodities, real estate the foreign exchange. As a published author in both peer reviewed and industry research, Sam has covered topics ranging from mortgage-backed securities to consumer spending and labor. Sam's resume includes more than 40 government and industry publications, thousands of financial articles and hours of educational resources on personal finance and trading.

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