US House votes for the Dodd-Frank repeal this week.
What it means?
The Dodd-Frank, a law for the regulation of the financial industry, was introduced in 2010 to promote financial stability. Trump is proposing a repeal of the law to reduce the regulatory burden on the banks.The US House votes on the bill this week
The good, bad and ugly
The move is being welcomed by the community financial institutions that were burdened under the Dodd-Frank with added compliance costs and inability to fund smaller clients that were “technically unfit” but risk worthy clients. While the relief for community banks is welcome, many are wary about the implications of easing regulations for the big banks. Rolling back regulations raises the possibility of banks engaging in risky behavior in a lighter regulatory regime
Enactment would be difficult
The bill has to pass through the Congress. Democratic interest in the reform is low. The bill would require 60 votes in the Senate to pass, whereas the Republicans have only 52.
The big bank stocks would be the obvious beneficiaries, but smaller financial institutions also stand to benefit. The stock markets could see a short term boost as markets cheer lesser regulation. However, it remains to be seen if more lending translates to long-term economic growth or another financial crisis. For now, speculation abounds..
Read more about impact of the reform on bank stocks here