Sen. Richard Shelby Slams Dodd-Frank, Says It Actually Fuels the Too-Big-to-Fail Bank Problem

By Published on July 22, 2015

Republican Sen. Richard Shelby of Alabama blasted Dodd-Frank as a failure on its fifth anniversary, telling an audience at the Heritage Foundation that “Dodd-Frank has encouraged the biggest banks to become larger and more concentrated.”

A long-standing critic of the legislation, Shelby is also chairman of the Senate Committee on Banking, Housing and Urban Affairs. Shelby argued Dodd-Frank had failed in its fundamental objectives of ending “too big to fail.” He added there were serious concerns regarding the oversight of the Consumer Financial Protection Bureau (CFPB).

Passed five years ago and totaling 360,000 words, one of the central aims of Dodd-Frank was to prevent a 2008 style financial crisis and another wave of bank bailouts.

“Failure is a part of capitalism and those businesses that take excessive risk should be allowed to fail,” Shelby said. ”Bailouts can be applied unfairly with government deciding which companies will survive and which will fail.”

Far from reducing the systemic risk of major Wall Street banks, Shelby said the onerous regulations introduced by Dodd-Frank has “encouraged the biggest banks to become larger and more concentrated.” This has often been at the expense of smaller community banks that have not been able to absorb the regulatory costs of the bill. The situation for these institutions has become so dire according to Shelby that these “Main Street banks were being treated like they caused the crisis.” (RELATED: GOP Takes ‘Vital First Step’ Toward Repealing Dodd Frank)

Aside from failing to reduce systemic risk in the financial sector, Dodd-Frank also gave birth to a new regulatory agency – the CFPB. The agency’s mandate has been widely criticized as vague and risks leading to arbitrary regulations and fines.

The Department of the Treasury says one of the agency’s mandates is to “promote fairness and transparency for mortgages, credit cards and other consumer financial products and services.”

However, it’s not just the vague remit of the CFPB that frustrates Shelby. It is the lack of accountability. “We don’t have the tools to do proper oversight of the consumer agency,” Shelby said while  He adding that the CFPB should be subject to the appropriation process.


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