Biden Highlights Dodd-Frank Repeal in Calls for Stiffer Bank Regulations

President Biden called for stiffer banking regulations as the fallout from the collapse of Silicon Valley Bank and Signature Bank rattles U.S. financial markets. The bank failures mark the second and third-largest in U.S. history, respectively, after the collapse of Washington Mutual in 2008.

In his speech on Monday, President Biden highlighted the partial repeal of the Dodd-Frank Act in 2018. The Dodd-Frank Act was passed in the aftermath of the 2008 financial crisis and was designed to counter financial excess and controversial lending practices that contributed to the crisis. The legislation aimed to tackle practices such as subprime mortgage lending and strengthen regulators’ oversight of the financial system.

The Dodd-Frank Act created the Financial Stability Oversight Council (FSOC) to monitor the activities of big banks deemed “too big to fail,” and to break up or liquidate banks that pose a systemic risk to the U.S. economy. The Dodd-Frank Act also established the Consumer Financial Protection Bureau (CFPB), tasked with preventing predatory and subprime mortgage lending, and the Volcker Rule, which prohibits banks from engaging in the riskiest trading activities.

Critics of the Dodd-Frank Act have argued that its requirements unduly burden smaller community and regional banks. In 2018, parts of the Dodd-Frank Act were repealed to loosen regulations on them by raising the asset threshold required for conducting stress tests, and exempting banks with assets under $10 billion from the Volcker Rule. However, the recent turmoil in the banking sector could prompt Congress to consider new legislation to more comprehensively regulate the banking industry.