A primary cause of The Great Recession, the financial melt-down of late 2007 until early 2009, was the lax regulation of the banking industry—especially among the largest ones, both here and abroad. Due to the depth of that recession, the Recovery, at least in the U. S., has been slow, but continuous. Overseas, however, many nations are still struggling in their recovery efforts.
On September 15, 2008, Lehman Brothers, one of the largest investment banks in the U. S., filed for Chapter 11 protection, and that event served as the proverbial straw that broke the camel’s back. The actual economic slide had already begun in October of the year before, when the stock market peaked and started a descent that lasted until early March of 2009. When President Barack Obama took office, in January of 2009, he called for legislation to rein-in the banks and provide stronger regulation. First proposed in June of 2009, President Obama signed Dodd-Frank into law, on July 21, 2010.
Wells Fargo is the current symbol of egregious banking activities. The bank had been caught opening unauthorized bank accounts and credit cards for customers, from which the bank’s retail revenue benefitted. Whatever the reason, Wells Fargo created the environment, and paid bonuses for employees to carry-out this fraudulent scam. But, other banks have been performing similar unauthorized activities too!
The Dodd-Frank Legislation, among many other things, created the Consumer Financial Protection Bureau. The CFPB, which was Senator Elizabeth Warren’s brainchild, before she was a Senator, is the agency that uncovered the Wells Fargo illegal scam. No doubt, a customer of Wells Fargo, or perhaps more than one, probably reported the scam to the agency. The CFPB is an important consumer safeguard against all financial institutions treating their clients’ unfairly. The web link is: http://www.consumerfinance.gov.)
Oddly, in today’s political environment, Secretary Hillary Clinton has been accused of considering Wall Street as a “Special Interest Group”. Let’s not forget, however, that President Barack Obama also accepted campaign contributions from the Financial Services Industry, and he still called-for banking reform, and he also signed Dodd-Frank into Law. Currently, banks appear to have realized that greater regulation will be forthcoming; however, they are totally afraid of Donald Trump’s suggested Isolationism and Protectionism.
Former Wells Fargo CEO John Stumpf (having just resigned yesterday) recently appeared before several Congressional Committees, and the attacks on him, and the bank, were both bipartisan, and quite angry. But, some of those Congressmen and Senators were really taking that tact for the hometown audience. After the hearings, the Republican members will probably return to their normal ideological voting agenda.
The Republicans in Congress have been trying to reduce the impact of what Dodd-Frank is intended to do, or to repeal it all-together. The current GOP Candidate for President has vowed to repeal Dodd-Frank, and so had mostly every other candidate in the GOP Primaries. That pledge is also frequently mentioned by other Republicans in the Halls of Congress.
How many times have we heard Republicans talk about eliminating the Federal Reserve, repealing Dodd-Frank and doing away with all regulation, in general? If there is another emergency, such as The Great Recession of just a few years ago—or perhaps something even worse—who or what will guarantee our bank deposits? Who would make sure that the banking system doesn’t take un-due risks? That banks have sufficient capital—think emergency reserves—to weather any storm? This would be where the Fed, Dodd-Frank and the CFPB would safeguard our very way of life!