Dodd Frank out, Financial Choice Act in. What it Could Mean for Jobs
Dodd Frank has been affecting banks and financial institutions for years with increased regulations and more strict compliance laws. As of recently, these organization are starting to see a light at the end of the tunnel. With changes on the horizon, of course industry jobs will be affected. Let’s dive into the newly proposed financial act and how it will affect jobs throughout the banking and financial landscape.
According to CNBC, Dodd Frank is “a law that places major regulations on the financial industry. It grew out of the Great Recession with the intention of preventing another collapse of a major financial institution.” It ultimately protects the consumer while putting many small businesses and banks at a disadvantage. Obviously, this piece of legislation is good for some and bad for others.
There has been a lot of buzz surrounding Dodd Frank over the last few months because Congress has now voted to repeal and replace it with a piece of legislation that counters it. This piece is officially named the Financial Choice Act (FCA), and it is rolling full steam ahead. It passed in the House, and is now being revised in the Senate. If it passes there, this new piece of legislation will become law, officially dismantling Dodd Frank. Let’s take a deeper look into what this would mean for jobs.
Much of Dodd Frank is aimed at limiting small banks’ ability to conduct their business as usual. It also puts a preference on bigger banks by providing bailouts for them directly from the government. They deem some banks “too big to fail,” which, according to the new FCA, doesn’t hold big banks reliable. The FCA aims at giving more financial freedom to small banks, which will increase the flow of the economy. The FCA also aims at holding big banks accountable for what they do, and eliminates government bailouts on wall street. Many claim that the FCA is “about helping Main Street, not Wall Street.” With freedom back in the small banks’ hands, policy makers believe that the economy can grow even more for years to come.
This would mean that banks now have the freedom to do what they want with their assets, which means they can expand and create more jobs. However, as this occurs, there is an increasing amount of risk that comes with expansion. If this risk pays off, the economy will be better than ever. But if it doesn’t, then many economists believe we could head into another recession similar to the one that sparked Dodd Frank in the beginning.
A main part of the new legislation aims to end the restriction on the creation of new small banks. This restriction put in place by Dodd Frank has hurt the expansion of many small businesses. Job Creators Network explains, “Since [Dodd Frank’s] passage, new bank creation has essentially stopped. Given that small banks make two-thirds of the country’s small business loans, this has had a disproportionate impact on small businesses’ ability to access credit to expand and hire.” By repealing and replacing Dodd Frank, small businesses will now be able to get more loans from the increasing number of small banks. This will ultimately lead to more jobs not only in the banking and finance sector, but also in many small businesses across the nation.
Across the board, many policy makers and economists are predicting a large increase in jobs in the financial sector if the Financial Choice Act were to become law. Speaker of the House, Paul Ryan, explains that the FCA is “a jobs bill.” As this bill gains momentum and more analysis is conducted, it is clear that the future is bright for jobs in the finance and banking industry.