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Monday, March 19, 2012

American Bankers Support Many Dodd-Frank Reforms

Treasury Secretary Timothy Geithner in ("Financial Crisis Amnesia," op-ed, March 2) correctly states that regulators didn't have the tools they needed to avert or effectively mitigate the 2008 financial crisis. That is why banks, contrary to popular belief, supported many of the core reforms contained in Dodd-Frank, including federal supervision of the shadow banking industry.

Had the law focused exclusively on such core issues, banks and the Obama administration would likely be engaged today in a productive, cooperative effort to rebuild our economy. However, the powers that drove the process took a while-we're-at-it approach, lumping draconian, ill-considered and sometimes unrelated "reforms" into the legislation that have put banks in an operational straitjacket. Not surprisingly, a wary if not hostile relationship has set in between two of the most important drivers of our economic recovery: policy makers and banks. What could be more counterproductive?

Perhaps if the law's staunchest defenders could do as Rep. Barney Frank himself has done and acknowledge the fallibility of some parts of this law, we could turn the page. Few measures passed in response to crises score straight As on the practicality test, and the risk runs higher for a statute as massive as Dodd-Frank. When theory clashes with the real world, the responsible thing to do is reconcile the two. That—and not amnesia—is what's behind calls for changes to the law.

For example, a bipartisan majority of senators last year recognized the potential dangers posed by Sen. Richard Durbin's debit-card interchange price controls and voted to stop, study and fix the provision that was opportunistically added to the reform law, even though it had nothing whatsoever to do with the financial crisis. The bill didn't ultimately succeed, but the vote is proof that not all agree Dodd-Frank is perfect as is.

The initial response to the crisis demonstrated that neither government nor banks alone could rescue the economy; they had to collaborate. The crisis may have passed, but that axiom remains true. Government and private industry must work in concert to achieve economic success. That means giving thoughtful consideration to constructive criticism and setting aside hyperbole that villainizes those who find fault with Dodd-Frank provisions.

The truth is that Dodd-Frank is neither an abject failure nor an unqualified success, and it's time to stop thinking in such absolute terms.

Frank Keating
President and CEO
American Bankers Association

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