Capital View

Thoughts and Ideas on the Mortgage Finance Industry from David H. Stevens, President and CEO Mortgage Bankers Association

Dodd Frank – Let’s Be Open To Changes

15252_blog_image_gearsTo my fellow stakeholders in housing and real estate:

Watching the latest positioning around some of the pieces of legislation related to the Dodd Frank Act, I do think there is at least a dialogue worth having about this landmark law.


The President gave an interview to the Economist Magazine in August of 2014, and I was struck by the following point he made: “So my belief is that if, in fact, we can see a reduction in some of the political temperature around Obamacare or around Dodd-Frank, then it’s an iterative process. We can go back at it and further refine it, learn lessons from things that aren’t working as well, make it simpler, make it better. That does require, though, an attitude on the part of Congress, as well as on the part of the business community, that says you don’t just get 100% of what you want.”
The President’s view is balanced and my concern is that there are some who are steadfast to hold the line to Dodd Frank in totality. Not willing to accept the possibility that there are some aspects of the law that may need to be refined. The misconception being that any measure to “chip away” at this legislation is not to be allowed as it will lead to a broadening base of ongoing challenges.
As one who was a regulator and worked on the passage of this law at the time, spending countless days and late nights engaged in meetings with members of congress and other stakeholders – I can tell you first hand that there were many provisions we did not agree on and, in fact, did not like. We pushed for the law based on the reality that the most impactful provisions would be better for a safe, sustainable housing market and the things we disagreed on could be evaluated post mortem. It has been, in my view, an unfortunate outcome that some have simply circled the wagons in opposition to any prudential modifications in a manner that seems to be a disconnect with even the statements made by the president.

I have attached a link to the full article below.

http://www.economist.com/blogs/democracyinamerica/2014/08/economist-interviews-barack-obama-0
The Economist: But don’t you wish, when you look at things like Dodd-Frank or you look at health-care reform—both of which we supported in principle—that they could have been much simpler?

Mr Obama: Of course. This goes back to the old adage of Churchill—democracy is the worst form of government except for all the alternatives. (Laughter.) It’s messy.
And so could we have designed a far more elegant health-care law? Of course. Would I have greatly preferred a blank canvas in which to design financial regulations post-2008 and consolidated agencies and simplified oversight? Absolutely. But the truth of the matter is, is that we saved the financial system. It continues to be extraordinarily profitable. And essentially, what we did was to provide an additional cushion so that if and when people make bad decisions with large sums of money—which they inevitably do—the risks to the system are reduced.
And on health care, as messy as the whole process has been, here’s what I know—that we have millions of people [insured] who didn’t have insurance before, and health-care inflation is the lowest it’s been in 50 years, for four consecutive years, corresponding to when we passed the law. So my belief is that if, in fact, we can see a reduction in some of the political temperature around Obamacare or around Dodd-Frank, then it’s an iterative process. We can go back at it and further refine it, learn lessons from things that aren’t working as well, make it simpler, make it better. That does require, though, an attitude on the part of Congress, as well as on the part of the business community, that says you don’t just get 100% of what you want.

Having this dialogue does not mean a lack of support for Dodd Frank. Protecting consumers and having an industry that isn’t tarnished by bad actors is a good outcome for the economy, for families, and for the housing system. Having an open mind with an eye to impact, consumer access to credit , and markets confusion should be paramount.

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