The Dodd-Frank Act passed less than a year ago, and although Sen. Dodd is no longer a member of the Senate, he provided an interesting perspective on the origins and context for this legislation and the various amendments to it, including the Durbin Amendment. Dodd started his speech with a timeline of the financial crisis, starting with the near failure of Bear, leading up to the meltdown of AIG, Lehman Brothers and Merrill Lynch. The TARP legislation that came out of that period was an attempt, to “…try to stabilize the financial institutions [in the United States]. Democrats and Republicans [came] together to create a tourniquet to save the industry,” Dodd explained.
“Had we not taken the action on October 1, 2008 [voting for TARP], we would be in a very different place than we are now,” Dodd reiterated, indicating that he thought that Congress did what was necessary to protect the financial industry from collapsing.
However, since it was clear to Dodd that fundamental reform of the industry was necessary, he, along with some of his fellow senators, set out to create the legislation that is now known as the Dodd-Frank Act. In crafting this legislation, he maintained that he focused on balancing some key objectives:
- “How do we make sure we don’t strangle growth and the hallmark of productivity and greatness while restoring confidence that the system is fair?”
- “How do we harmonize rules internationally?”
Dodd went on to outline the key provisions he wanted included in the final legislation:
- Too big to fail provisions – implicit or explicit guarantee of govt. bailout is not acceptable
- Some ability to have transparency on exotic industries, especially derivatives
- Oversight – creation of the Financial Services Oversight Council and the Consumer Financial Protection Bureau (CFPB)
In reference to the CFPB, Dodd said, “I find the opposition to this stunning… if you have a bad consumer product, there is a place to go.” He contended that the creation of the CFPB simply provides consumers with a place to turn if a financial service product or transaction “goes wrong.”
Dodd claimed that he thought the provisions related to payment card interchange were such a “complicated area of law” that he didn’t think it was appropriate to “oversimplify” the issues and thus didn’t include anything on interchange in the original version of the legislation. Even when his colleague Sen. Durbin introduced his now famous amendment, Sen. Dodd was surprised that the Durbin Amendment “flew through.” And in fact, Dodd reinforced his surprise at how the issue ultimately was ruled on by the Fed.
“I was shocked by the 12 cents,” said Dodd. “My reaction was that the Fed set such a low number.”
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Dodd went on to say that he thought that while the Tester Amendment had low likelihood of taking effect. He guessed “that the Fed is going to have to move the number up from 12 cents.” Dodd also took issue with the dual standards for larger institutions vs. small credit unions and banks with less than $10 billion in assets.
“It’s too complicated,” the Senator argued.
The Senator ended his remarks with an impassioned call for the participants at ETA to get involved in the legislative process to help Congressional representatives better understand the issues and points of view of the companies, employees and business people represented at the conference. Ultimately, Dodd wanted the audience to view the Dodd-Frank legislation in the context of “how close we came to financial disaster, and [although] this legislation is far from perfect, [it represents] stepping up and trying to do the best you can for your country in a time of crisis.”
Margaret is a Managing Director at Market Platform Dynamics and experienced payments industry executive with a proven track record of commercializing new technologies in small start-ups, and large multi-national corporations. Read More
SAN DIEGO — The Electronic Transactions Association (ETA) opened its Annual Meeting and Expo Wednesday with a keynote address from Sen. Chris Dodd, former Chair of the Senate Banking Committee and co-sponsor of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act. Dodd provided the audience of about 1,000 with an overview of the history of recent financial legislation as well as some predictions about the future direction of interchange rulings.