
Congress Approves First Big Dodd-Frank Rollback - aaronbrethorst
https://www.nytimes.com/2018/05/22/business/congress-passes-dodd-frank-rollback-for-smaller-banks.html
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zizek23
Taxpayers are on the line for trillions of dollars with socialized risk and
yet there are people on this thread regurgitating the same old anti-government
anti-regulatory line without any irony. How can you roll back regulations
without resolving fundamental questions about risk and 'too big to fail'. With
citizens like this who needs oligarchs.

These are the same anti-government folks who will whine endlessly about social
services as 'handouts' and 'freebies' and look the other way while trillions
go to subsidize the rich and powerful. This is ideology.

Either you believe in democracy or you do not. In a democracy the government
is you, not an organization out to get you. Regulations exist to protect the
whole from the greed of a few.

This mythical anti-government civilization full of freedom only works in a
farming based frontier society that has occupied land and can give parts of it
away for free to all new comers, where any government can only take away
rights. But that time is long gone.

~~~
PurpleBoxDragon
>Regulations exist to protect the whole from the greed of a few.

Regulations exist so that entrenched players can use the lethal force of
government to block new challengers. Never quite as blunt as I put it, but
that is the threat backing all the actual outcomes.

And the overall solution is to allow them to fail next time. Don't fix it, let
it crash and burn. Stop socializing the losses since the profits were
privatized.

~~~
mikec3010
>And the overall solution is to allow them to fail next time

Then pass a regulation barring the US from ever giving another "bailout". In
the aftermath of '08 those corporations played the US like a fiddle to get
their billions of dollars in free loans because "our whole financial system
could collapse if you dont". Why wouldn't they play this game again, perhaps
even more brazenly than last time?

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gehwartzen
My wife works in the corporate mortgage department of a fairly large US bank
and she told me how many of her fellow employees cheered on this news a few
months ago when it became clear regulations would be rolled back. Then a month
ago about half of those same people lost they're jobs; turns out spending
extra resources checking the accuracy of loans and applicant financials is not
something banks do if they don't have to.

The other interesting tidbit I learned form her is that the bare minimal
paperwork processing that will still get done is actively being outsourced to
India. Just a reminder that one of the large problems to come out of the last
financial crisis was that banks couldn't even tell who owned the actual
morgages or provide the actual signed loan documents to many borrowers.

If (or rather when) we have the next mortgage crisis it's going to be an
absolute mess.

~~~
nervousvarun
So basically when that invariably happens (next mortgage crisis) we can expect
more of the same...public losses, privatized profits.

~~~
ktsmith
The more immediate crisis will probably be due to other types of consumer
debt. Take a look at auto lending and bundling as an example.

~~~
fallingfrog
Not to mention the mountains of leveraged buybacks and leveraged buyouts. In
my industry all the big players are bidding prices that can't possibly turn a
profit for assets which they evidently hope to flip later. I think that kind
of behavior is endemic at this point. So I think it's going to wind up being a
corporate debt bubble.

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TomMckenny
Seems 2008 didn't cause enough misery for voters to understand their own
interest.

But maybe the next one will be bad enough, or the one after that worse yet. I
gather the last time this happened (1870s-1930s) it was a lot of fun.

~~~
nielsbot
Not being snarky--but did Trump promise anything specifically about bank
regulation when he was campaigning?

Maybe the populist "drain the swamp" could be taken as a vague direction on
this issue, but in any case he seems to have done the opposite.

~~~
ars
This was a bipartisan act of congress, not a Trump thing.

~~~
nielsbot
How many Dem votes before a bill can be labeled bipartisan? 1? In my mind
bipartisan should practically be nearly equal representation from both sides.

~~~
jkaplowitz
In my mind the bill needs significant representation from both sides to be
bipartisan, but not necessarily equal. Unfortunately this had that.

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ars
Why is everyone so against this? These types of laws tend to be worthless,
except in one thing: Preserving incumbents (large banks in this case).

Large banks can easily deal with the law and keep right on going. All it does
is make life much harder for smaller banks.

~~~
nielsbot
My vague understanding was that Dodd-Frank was a partial restoration of the
pre-Clinton era limits on speculation... Is that not correct? In any case I
don't understand how that helps preserve incumbents over small banks.

~~~
ars
It does a LOT of stuff. Some good, some just paperwork. It's the paperwork
part I'm talking about.

But it's such a large act that without knowing which parts were repealed it's
very hard to discuss.

~~~
lallysingh
Just a note: paperwork is usually just data on disk now. Maybe a database or
10, or just a bunch of logs. But generally not as bureaucratically onerous as
one envisions a ton of actual paperwork.

A virtual paper trail isn't a bad thing when you've got to (a) manage risks
based on decisions made by these processes and (b) make sure you're obeying
the law.

~~~
pzone
No, Dodd-Frank is in fact bureaucratically onerous. The cost of paperwork has
nothing to do with whether or not the documents are actually on paper.

~~~
klipt
Data science is hard and requires lots of data. It's still useful to have that
data.

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reilly3000
My understanding of the issue is that it was mostly a scaling falicy. A ratio
of assets to loans was asserted by the federal government that banks and
credit unions must operate within, but that ratio was too onerous for small
players like credit unions with less than $1B in assets. I did marketing for a
credit union that had to constantly stop doing auto loans or quickly double
down to maintain a tightrope walk to stay inside those ratios. It was much
easier to comply with at larger scale. Bad maths made a decent rule into
something that had unintended consequences.

~~~
chris11
I can see it both ways. I have heard that the original restrictions were too
onerous on small banks. But on the other hand, a failing asset class will
affect multiple banks. It's possible that multiple community bank failures
could act like a bigger bank failing.

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castratikron
I've been holding off buying a house until the next crash. Won't have to wait
much longer.

~~~
ars
You'll be waiting a LONG time. The next crash will be student loans. The one
after that will be something else entirely.

There won't be another house price crash until there is another generation of
people who forgot the old one. You could be waiting 20 to 30 years.

A truism of the financial world is that if you thought of it, so did everyone
else. That means that unless you are truly original (you probably aren't) you
can only make money on a particular position if that position is one that
makes money if everyone does it.

A position that requires you to do it, and everyone else to do something else
(like waiting on a crash to buy a house, while everyone else doesn't) isn't
going to work. If you are waiting, so is everyone else, and that means
everyone will buy, which means the price won't go down, and you have a self-
canceling prophecy.

~~~
adventured
Student loans are not large enough to matter in the regard you're referring
to. The housing market mess was at least 30 times larger than the student loan
mess.

Most student loans are in the government's hands, most of the interest goes to
the Federal Government, not to eg JP Morgan or Bank of America. The US
financial system has minimal exposure to student loans and the default
problems.

You're talking about $400 billion of present high risk default potential. The
housing market crash wiped out ~$25 trillion in paper wealth just in the US,
including in the stock market. American wealth dropped by 40%.

That drop would be equal to $40 trillion today. The entire student loan market
is $1.4 trillion, a fraction of that is a default problem.

The Fed was running $85 billion per month QE programs just to stabilize the
housing market.

If it were necessary, the Fed could fix the student loan mess in six months of
casual QE.

The 2008-2010 great recession took down dozens of global banks, including
making two of the big four in the US insolvent. Dozens of large corporations
from around the globe required short-term Federal Reserve loans to remain
operational as the global monetary & banking system froze.

Student loan defaults are a $50 billion per year problem. The loaned out money
was conjured out of thin air by the Fed and US Government (which does not have
a surplus to lend); the interest being paid is paid on that same magic money.
The Fed shovels large piles of cash back to the US Government every year. If
they need $300 billion to fix it, they've got more magic money (ie the Fed
will debase the dollar and 0.2% of the value of all dollar assets globally and
they'll do a program with the US Treasury).

~~~
asah
This is really insightful, thanks!!!

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BurningFrog
Nobody knows what's actually in Dodd-Frank, but a _lot_ of people have
opinions about it!

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asah
Sorry for the naive question, but what actually happened? WSJ is reporting
that the big change is the increase from $50B to $250B for the definition of
"large bank" subject to automatic "too big to fail" regulations.

Here's the list of ~30 banks affected according to wikipedia as of ~Jan 1,
2018:

rank, name, location, marketcap

13 Charles Schwab Corporation San Francisco, California $243B

14 State Street Corporation Boston, Massachusetts $238

15 BB&T Winston-Salem, North Carolina $221

16 SunTrust Banks Atlanta, Georgia $205

17 American Express New York, New York $181

18 Ally Financial Detroit, Michigan $167

19 Barclays New York, New York $157

20 USAA San Antonio, Texas $155

21 MUFG Union Bank New York, New York $154

22 Citizens Financial Group Providence, Rhode Island $151

23 Deutsche Bank New York, New York $148

24 Fifth Third Bank Cincinnati, Ohio $142

25 Royal Bank of Canada New York, New York $141

26 Credit Suisse New York, New York $141

27 UBS New York, New York $140

28 BNP Paribas New York, New York $139

29 Northern Trust Chicago, Illinois $138

30 KeyCorp Cleveland, Ohio $137

31 BMO Harris Bank Chicago, Illinois $131

32 Santander Bank Boston, Massachusetts $128

33 Regions Financial Corporation Birmingham, Alabama $124

34 M&T Bank Buffalo, New York $118

35 Huntington Bancshares Columbus, Ohio $104

36 Discover Financial Riverwoods, Illinois $100

37 Synchrony Financial Stamford, Connecticut $95

38 First Republic Bank San Francisco, California $87

39 BBVA Compass Birmingham, Alabama $87

40 Comerica Dallas, Texas $71

41 Zions Bancorporation Salt Lake City, Utah $66

42 E-Trade New York, New York $63

43 Silicon Valley Bank Santa Clara, California $51

What else is there? (besides partisan histrionics)

Xpost from Reddit:
[https://www.reddit.com/r/politics/comments/8ldxmj/comment/dz...](https://www.reddit.com/r/politics/comments/8ldxmj/comment/dzffn3v)

~~~
gehwartzen
Will be interesting to see what with some of these banks as they grow and
start approaching the new $250B cliff. I suspect a lot of creative accounting
and a glut of banks at the $249B level in a few years.

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jopsen
To be fair, deregulating small banks might make some sense.. If it's not too
big to fail, then by all means let it fail :)

Ideally, you would follow it up by putting even stronger regulation on big
banks.

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rdiddly
Apparently they would like a financial crash and a violent revolution?

~~~
voodootrucker
In bound...

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chiefalchemist
"A decade after the global financial crisis tipped the United States into a
recession..."

should read:

A decade after the global financial cluster f#ck - orchestrated by
irresponsibility and negligence on the past of the United States government,
and its puppet master, Wall Street - politely refereed to as a recession..."

~~~
girvo
That also pushed most of the western world and some other financial hubs into
meltdown too! This doesn’t just affect the USA :(

~~~
chiefalchemist
My point was, the USA was the means and the ends, not just the ends. The USA
was the perp, not the victim.

The NYT's wording attempts to rewrite history, badly. This is journalism?

~~~
girvo
I wasn’t disagreeing with ya, just expanding on your point. The quote and
article seemed to ignore the world wide impact 2007 had

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hackeraccount
Meanwhile what's being done about Fannie Mae and Freddie Mac? Nothing. It's
being pushed around with the hope that everyone will forget about them until
the next crisis.

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woodie_w
This is actually a good thing, the regulations were a big burden to small
banks. The roll back doesnt affect the "too big to fall" institutions but it
really eases the pressure on local and regional players.

Dodd-Frank costs banks a lot of many but it doesnt scale with the size of the
bank, smaller banks are subject to the same constraints as the biggest banks
though they are not capable of causing a systemic crash. They should not be
penalized for the actions of the bigger players.

~~~
eganist
> smaller banks are subject to the same constraints as the biggest banks
> though they are not capable of causing a systemic crash.

Contagion
([https://en.wikipedia.org/wiki/Financial_contagion](https://en.wikipedia.org/wiki/Financial_contagion))
can still take place with a (literal) local bankruptcy depending on the
exposure of larger institutions to that smaller firm's losses.

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WC3w6pXxgGd
It's about time. Dodd-Frank is an absolute embarrassment and is just
bureaucratic nonsense, created so the gov can pretend they've done something.

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godzillabrennus
Bitcoin should jump up in price.

~~~
lopmotr
People really need to stop predicting market prices on internet forums. You
have no hope of being right better than chance. Bitcoin is liquid enough that
any news about law changes will have been incorporated into the price before
you hear about it on Hacker News. If you actually believed yourself, you'd be
betting money on it, not telling everyone. That shows that you don't believe
what you're saying, so it's wrong to try to persuade other people. Wait till
you got rich being right more than you were wrong, then tell people about it.

~~~
smudgymcscmudge
Are you familiar with the phrase, “shooting the shit”? That’s all we do in the
comments here. You shouldn’t take them seriously.

------
microcolonel
Excellent, now if we can just stop manipulating risk assessment in the student
loan market we'll be on track. Glad to be moving to the U.S. in the middle of
what appears to a policy renaissance. Maybe something can be done about the
budget, though I can't exactly judge each administration for not taking on
such an abstract marketing challenge.

Pretty sure this only applies to banks with small holdings, so I'm not really
sure why anyone's getting their panties in a knot.

~~~
ajross
Why pick on student loans and not mortgages? The home interest tax deduction
is a much, much bigger subsidy, with rather worse externalities ("housing
crisis" vs. "a bunch of 20-somethings with worthless degrees).

~~~
koolba
Housing has collateral, the house and land it sits on.

A useless degree has zero value and can’t be resold to cover the dollars lost
to unrepaid student loans.

~~~
Broken_Hippo
How do you figure what degree is useless?

I mean, an art degree can easily lead to retail management. A business
management degree often leads to the same sort of job. In some companies, you
can earn these jobs working, but you are more likely to reach that management
position at 30 instead of 23. These jobs don't pay all that much, true. But it
is better than nothing and hey, if you went to college, you'll likely be a few
years ahead of the peers that didn't. Theoretically, this will be a bonus. A
teacher might not earn enough to cover their loan, especially if the person
has an early childhood education (pre-school) degree as those jobs tend to be
just slightly more than minimum wage. Yet few would argue that these are
useless degrees. Some degrees become useless over time when a field is phased
out, and others produce a few too many degrees when the field changes,
rendering a few useless. Lawyers have experienced this - and not only that,
but those lawyers that decide to do community work and be a criminal lawyer
(especially a public defender) might not be able to afford his or her loans.

This is the problem with writing degrees off as useless due to earnings. Lots
of professions will fall into that category, even if I get the feeling they
are talking about things like art degrees - which some folks would argue are
necessary. The only real way to avoid this is to make sure the student loans
are affordable even in the worst situations. Make college not cost as much.
Use alternative ways to provide education other than loans. Taxes are a good
start for funding since overall, college degrees are good for the college at
large.

~~~
koolba
> How do you figure what degree is useless?

If it has no positive bearing on your employment prospects then, for the
purposes of producing a livelihood, it's useless.

> I mean, an art degree can easily lead to retail management. A business
> management degree often leads to the same sort of job. In some companies,
> you can earn these jobs working, but you are more likely to reach that
> management position at 30 instead of 23. These jobs don't pay all that much,
> true. But it is better than nothing and hey, if you went to college, you'll
> likely be a few years ahead of the peers that didn't. Theoretically, this
> will be a bonus.

Spending tens of thousands of dollars for something that's " _better than
nothing_ " is lunacy. Might as well just give the money directly to those
people so they can use it as a down payment for a house.

> A teacher might not earn enough to cover their loan, especially if the
> person has an early childhood education (pre-school) degree as those jobs
> tend to be just slightly more than minimum wage. Yet few would argue that
> these are useless degrees.

Most teacher's degrees _are_ useless. I'm not suggesting we eliminate training
or education entirely but a preschool or elementary school teacher does not
need to spend four years at university to teach children ABCs or 123s.

> Some degrees become useless over time when a field is phased out, and others
> produce a few too many degrees when the field changes, rendering a few
> useless. Lawyers have experienced this - and not only that, but those
> lawyers that decide to do community work and be a criminal lawyer
> (especially a public defender) might not be able to afford his or her loans.

And it naturally sorts itself out over time. It happens to people without
degrees as well. There were plenty of horse carriage drivers that had to find
alternative work.

> This is the problem with writing degrees off as useless due to earnings.
> Lots of professions will fall into that category, even if I get the feeling
> they are talking about things like art degrees - which some folks would
> argue are necessary. The only real way to avoid this is to make sure the
> student loans are affordable even in the worst situations.

I'm not against people pursuing their dreams. I'm against them doing it with
my tax dollars. If a future barista wants to spend four years partying at a
liberal arts school studying underwater basket weaving then let her find her
own sugar daddy to pay for it.

> Make college not cost as much.

Stop handing out boat loads of cash via student loans and college prices will
plummet immediately.

> Use alternative ways to provide education other than loans. Taxes are a good
> start for funding since overall, college degrees are good for the college at
> large.

Or starve the beast and let it fix itself in the private sector.

Honestly the only government involvement I'd be on board with is on the supply
side, primarily through nominally priced community colleges. At least there
the outlays are fixed (i.e. fixed local budget), there's no money flowing to
shady private sectors, there's no conflict of interest in juicing the price
higher as it's coming out of the same pocket. I suggest nominal pricing over
free as there needs to be some skin in the game for students as well though
I'd want it to be low enough that a min wage job should cover it.

This approach also has the pleasant side effect of forcing private
institutions to compete against nearly-free community colleges. Without
Federal loans juicing their prices, they'd be forced to come down as well.

