US Elections 2016: Focus on Proposed Changes on Dodd Frank Act

Among the top campaign agenda for this year’s US presidential aspirants Hillary Clinton and Donald Trump is how to deal with Wall Street and curb its excesses once either of them clinches power. At the surface of the debate on financial markets reforms needed, they both appear to be reading from the same script that indeed there are policy changes needed in order to strengthen the financial sector within the US. However, they are both applying different approaches and as expected, they have to differ in content to present their political parties as the parties of choice; but the context of their arguments remains the same.

Donald Trump, the republican presidential nominee proposes several policy changes touching on the financial markets in the United States. Among the top policy changes that he is proposing include repealing of the Dodd Frank Act. The law which is known in full as the Dodd–Frank Wall Street Reform and Consumer Protection Act was signed into federal law on July 21^st 2010 by president Barrack Obama. This came after the great recession in 2008 which led to a financial crisis globally; thereby creating the need to have tougher financial regulations in order to protect the US economy from shocks resulting from short-falls in the financial sector. The law created the Consumer Financial Protection Bureau whose responsibility is to oversee consumer financial products such as mortgages. The law also gave financial sector regulators new powers over large non-bank financial companies.

In an interview with Reuters in May, Donald Trump said that “Dodd-Frank has made it impossible for bankers to function. 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.” He said that he would be repealing the law and when asked about how far his proposed changes on the law would be, he said that “it will be close to dismantling of Dodd-Frank.” Trump has the support of republicans in the congress who are pushing for less strict requirements for the small and medium sized banks as well as taming the power of the regulator in making new laws that could hurt the small and medium banks. In addition, they also want the consumer financial protection agency to be scraped off.

Trump’s proposal of repealing Dodd Frank is also getting support from other quotas. In an interview with Reuters, John Hall, a spokesman for the American Bankers Association said that “Every law can be improved, and Dodd-Frank is no exception. Sometimes there are drafting errors. Sometimes a good idea in theory turns out to be unworkable after a closer look in the light of day.”

On the other hand Hillary Clinton the democrats’ presidential nominee thinks that Dodd Frank should be extended to have a wider reach compared to its current application.  In an article on December 7^th  2015 in the New York Times, Hillary is quoted saying that “As president, I would not only veto any legislation that would weaken financial reform, but I would also fight for tough new rules, stronger enforcement and more accountability that go well beyond Dodd-Frank.” Later on in April 14^th 2016 in a democratic debate and in reference to Dodd Frank she emphasized that “I want the law to extend to those that are part of the shadow banking industry—the big insurance companies, the hedge funds.”

Hillary seems to have taken a very strict stance on tightening financial regulations in the US in order to protect the economy from financial risks. On her campaign website, she is quoted saying that “Our banking system is still too complex and too risky. … While institutions have paid large fines and in some cases admitted guilt, too often it has seemed that the human beings responsible get off with limited consequences—or none at all, even when they’ve already pocketed the gains. This is wrong, and on my watch, it will change.” True to her words, Hillary is proposing to curb Wall Street pay, impose a “risk fee” on the largest banks beyond the higher capital requirements already imposed over the past 6 years as a well as  tighten the “Volcker Rule”.

None of the two presidential aspirants has whoever targeted the forex markets yet with their proposed changes in the financial markets regulations. This is partly due to the fact that forex markets are not centrally regulated since they are an international inter-connection of computers and it would be literary difficult to regulate them. This then leaves room for investors to invest their money in forex trading using online platforms such as those found on ETX Capital without any strict government regulations and control.

As the Americans wait to cast their votes on November 8^th, we can only expect that whoever gets to power will ensure that the US financial system is well securely regulated and that the small banks also have a chance to grow and thrive within the set regulations.