On the surface, it may appear that the debate over financial regulation is stuck in a time warp. Candidates continue to rail against Wall Street and threaten to "break up the banks!" Rulemaking for the costly and often counterproductive Dodd-Frank legislation grinds along, with dozens of rules and billions in compliance costs yet to come. But a closer look at voters' attitudes indicates that Dodd-Frank is ripe for reform.
That's the message of new polling by the American Action Forum. Importantly, the poll pays special attention to competitive swing districts whose crucial voters support reforms. For example, competitive district voters thought the inability of borrowers to afford credit caused the 2008 meltdown, rather than regulatory gaps.
By a 61% to 29% margin, those surveyed in such districts agreed with this statement: "Although the Obama Administration claims that lack of regulation caused the financial crisis, the real cause was misguided federal policy that encouraged banks to offer loans to people who could not pay them back, leading to a nationwide real estate crash." Overall, voters in the survey endorsed this view by a margin of 65% to 26%.
And they have watched what has happened since. Voters agree 56% to 33% — 54% to 35% in swing districts — "that federal government has issued an avalanche of new regulations which are strangling our economy, killing jobs, and eating away at our freedoms." But the clincher was this: Voters were asked, "Which of the following do you think has had more of a negative impact on your personal financial situation over the last decade?" They picked big government over big banks by a 47% to 33% margin (40 to 36 in swing districts).
In short, voters are skeptical of federal policy. They believe the administration's record of 10 final regulations a day and $100 billion a year in compliance burdens is damaging the economy, and that this is translating into direct financial harm to communities.
Voters also show little allegiance to Dodd-Frank. Unlike the Affordable Care Act, for example, there is little recognition of the 2010 financial reform law. The survey asked, "How familiar would you say you are with the Dodd-Frank Wall Street Reform Act?" In response, 63% chose "unfamiliar" and only 36% responded "familiar." The numbers are virtually identical in competitive districts — 62% to 37%. Similarly, unlike the ACA, there are few strongly held beliefs about Dodd-Frank. Overall, 37% support it, while 39% oppose it. In swing districts, those in favor nudge out opponents 39% to 38%.
But when voters are informed about the fallout from the law, things change rapidly. Respondents were told, "Before the Dodd-Frank Act, over 75 percent of banks offered free checking. However, after the Dodd-Frank regulations took effect, only 39 percent now offer free checking." As a result, 64% of respondents in competitive districts were less likely — versus only 12% more likely — to support the Dodd-Frank law. When voters were told, "The Dodd-Frank Act was aimed at big banks, but its crippling legal and administrative costs have caused many small banks to close or reduce lending which has harmed local economies and made it increasingly difficult for small businesses and entrepreneurs to thrive," 67% of swing-district voters were less likely to favor Dodd-Frank versus 14% more likely.
Republicans have tried to correct the overreach in Dodd-Frank for years. To do so, they have to be able to appeal to those outside their base. These polling results show there is a predisposition for fixing regulatory overreach among swing voters. Moreover, if given concrete information about the consumer harms stemming from the Dodd-Frank reforms, they are inclined to try another approach.
To be sure, it is still possible to stir populist discontent by invoking "greedy Wall Street executives," and the AAF polling confirms this. But if the issues are stripped of personal attacks and analyzed on the basis of policies, financial institutions and governments, the American public is prepared to trade Dodd-Frank for a less burdensome and more effective approach.
Douglas Holtz-Eakin is president of the American Action Forum. He is a former director of the Congressional Budget Office and economic adviser to Sen. John McCain's 2008 presidential campaign.