It’s hard not to wonder if we’re slowly headed for another recession with Trump’s partial rollback of Dodd-Frank.
What Caused the Great Recession?
The Great Recession was the worst financial crisis in the United States since The Great Depression in the 1930s. The Great Recession was caused by multiple factors, but the main cause was the lack of banking regulations. The subprime mortgage industry crashed because lenders persuaded people who weren’t qualified for conventional mortgages to get a subprime mortgage instead.
While different mortgage types suit different priorities people may have, lenders weren’t concerned about the well-being of their customers. They made risky moves by giving out loans, but also, no one was telling them they couldn’t. The banking industry as a whole was at fault. As a result, homeowners couldn’t afford their homes and many had to foreclose on their property. There are multiple parties who were responsible, but the lack of regulations were the cause of The Great Recession.
Partial Rollback of Dodd-Frank
Trump signed into law a partial rollback of the Dodd-Frank Act. This partial rollback doesn’t erase everything The Dodd-Frank Act was meant to do, but it does undo some important things. Debt to income and value ratios that restricted overspending and reporting requirements are no longer under a microscope. Banks were required to be more transparent with their customers with The Dodd-Frank Act. This is no longer the case.
The Dodd-Frank Act was put into place to prevent another recession. It was also created to prevent the usage of taxpayers’ money as a bailout. With this partial rollback, we’re already steering in the direction of another recession. Even though big banks are unaffected by this change, regulations are being lifted and a partial rollback was signed into law. This means there is room for more changes in the future.