Donald Trump passed an executive order on February 3, 2017 designed to pave the way for an overhaul of the Dodd-Frank Act.
The Dodd-Frank Act was passed in 2010 in response to the economic collapse of 2008 and was enacted to prevent the failure of big banks causing another meltdown of the financial system. Furthermore, it allows the government to closely monitor and limit the risks institutions deemed “too big to fail” can take.
Some small to mid-size business owners blame the Act for making it difficult to obtain loans from banks because of overregulation. In response to their frustrations President Donald Trump said, “We expect to be cutting a lot out of Dodd-Frank, because frankly I have so many people, friends of mine, that… just can’t get any money because the banks just won’t let them borrow because of the rules and regulations in Dodd-Frank. So we’ll be talking about that in terms of the banking industry.”
In addition, Gary Cohn, director of the national economic council, said, “Americans are going to have better choices and Americans are going to have better products because we’re not going to burden the banks with literally hundreds of billions of dollars of regulatory costs every year.”
While some see changes to the Act as a relief, others feel like the executive order is pulling a security blanket off of the banks, paving the way for another potential economic crisis. Federal Reserve chief Janet Yellen claims the financial regulation mandated by the Dodd-Frank Act ensures a “safer and sounder” economy.
If the changes are made to the Act, then it will open up new possibilities for businesses looking to expand. With fewer regulations on the bank, then businesses can apply for loans that they can use to support their growing business. However, more possibilities also open up more risk. Businesses should be careful to not abuse any changes that may occur for fear of causing another economic crisis.
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Andrew is the Marketing Communications Specialist for Zuman, the one solution for HR, payroll, and benefits administration that supports growing small to midsize businesses.More Content by Andrew Larsen