WASHINGTON The repeal of a key Dodd-Frank Act swaps provision earlier this month was a blow to progressive advocates and lawmakers, but former Rep. Barney Frank says there's still reason to be optimistic about the future of financial regulation.
The fight came as Congress debated a $1.1 trillion spending package, which included language undoing most of a Dodd-Frank requirement that banks push out certain derivatives into subsidiaries. While efforts to remove the language from the spending bill ultimately failed, Frank argued the blowback will make it harder for banks to try the same tactic again later.
"There was a sustained public outcry against this, dispelling my fears that conservative efforts to dilute the bill by focusing on relatively obscure provisions would go unnoticed," he wrote in an op-ed Monday for Maine's Portland Press Herald.
Of course, as one of the lead authors of the 2010 reform law, Frank acknowledged that he's disappointed by the change, and particularly the Obama administration's push for passage of the spending bill in spite of the swaps rollback.
"The bad news is that the assault on the financial reform bill came earlier than I expected and, distressingly, with less resistance from the president than I assumed would be the case," the former Massachusetts lawmaker wrote.
Still, Frank said his optimism stems from the ensuing public outrage. Lawmakers including Rep. Maxine Waters, D-Calif., and Sen. Elizabeth Warren, D-Mass., loudly objected to the measure despite the Obama administration's push for passage, rallying progressive advocates concerned about financial reform.
"My fear was that with the recession ending and economic growth resuming, the media would once again pay little attention to some of the technical, albeit important, aspects of the bill. My optimism is due to the fact that this was clearly not the case," Frank said. "I have not been asked to comment as much on a public policy question since the Supreme Court's undoing of the Defense of Marriage Act." Moreover, the vocal opposition to the change also came despite the fact that the provision was not a key pillar of the Dodd-Frank law, Frank noted.
"It is clearly preferable" that banks conduct riskier swaps activity outside of business lines backed by federal deposit insurance, though even with repeal of the provision "there are strong safeguards that protect us against the kind of irresponsibility by AIG and other entities that caused the crash," he wrote.
Looking forward, those pushing for changes to the law now know how much opposition to expect a critical issue when Republicans take control of the Senate next year and gain an even stronger majority in the House.
The White House has also indicated that the president will use his veto power if Congress tries to push through another change to Dodd-Frank in a spending bill.
"What we now know is that this method is not going to shield people from the criticism that will come if they try to repeat it, including Obama," said Frank. "I very much regret the repeal of this provision, even though it was not one of the central tenets of reform, but I am greatly encouraged by the loud, sustained public outcry against the move. I believe that this demonstrates that even with the Republicans controlling both Houses, it will be very difficult for them to move further in this direction next year."