The Dodd-Frank Act became law in 2010, adding more regulation to a banking industry that was already heavily regulated. The main purpose of this 2,300 page act was to give consumers protection against big profit seeking banks but the unintended consequences prove to be much greater. The regulation was supposed to help the little guy but as Acton Director of Research Samuel Gregg writes at The Stream, it actually hurts the little guy.
President-elect Donald Trump claims that he wants to deregulate the financial industry but in order for this to happen successfully, we need to understand the argument for why such actions would be beneficial. Gregg says this:
Consider, for instance, the costs associated with meeting the ever-growing demands of regulatory compliance. Such costs are more easily borne by large banks than smaller-sized institutions such as community banks. The result is that excessive regulation makes it harder for smaller banks to compete. That often puts access to capital out of reach for many people.
But perhaps the most harm which excessive financial regulation inflicts upon ordinary people concerns the ways in which such regulations can — and have — contributed to financial meltdowns. Such crises are far more likely to hurt those on the lower-side of the economic scale than the already-wealthy.