Even though the Dodd-Frank financial reform law signed in mid-2010 was supposed to help control huge financial firms, they might instead help make big banks bigger. The reform made sure that taxpayers would never have to rescue the largest banks in order to stop the entire financial system from collapsing again. It seems that the federal agencies enforcing these laws seem to strengthen the dominant position of the bigger banks. The Federal Reserve issued regulations meant to curb commission payments could just as easily give big banks the chance to dominate the mortgage market. These same big bank biases again resurface in a rule purposed by 6 big name banks that requires “issuers of mortgage-backed securities to keep 5 percent of bonds on their books”. Conservative mortgages (borrowers with good credit and at least 20 percent down) are exempt. Large banks can afford to keep the required risk on their books. In the end, the Dodd-Frank financial reform which was supposed to end “too big to fail” might in turn make big banks bigger.
1 comment:
i think that the banks need to follow more strict regulations because they seem to be causing many problems in todays economy. in the case of sub-prime lending the banks were taking advantage of consumers and there was no one to step in and stop it until it was too late. if regulations were put in place to make the banks more responsible for their actions then i think that we would have fewer problems to deal with today.
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