As the fate of the Dodd-Frank Act hangs in the balance, question marks bubble over how exactly the disintegration of this Obama-era policy regulating banks will impact small businesses across America, if at all.
The partial rollback--dubbed the Economic Growth, Regulatory Relief, and Consumer Protection Act--passed through Congress on Tuesday to the delight of Republican lawmakers and the banking industry. Formed in response to the 2008 financial crisis, Republicans, and some Democrats, argue Dodd-Frank unnecessarily hurt small and midsize banks that didn't contribute to the initial economic downturn. This reform will remedy that by lifting some of the regulations on thousands of small to midsize banks.
"Lending is much harder than it was before the great recession," says Molly Day, the vice president of public affairs for the nonpartisan small business advocacy group, the National Small Business Association, or NSBA. In reference to the impacts of Dodd-Frank, she adds: "There are some sound consumer protections in there but it probably went a little too far."
If signed by President Donald Trump, which will reportedly happen in the coming days, the effort would free banks with fewer than $250 billion in assets from strict federal oversight, allowing them to take risks the original iteration of the bill protected against. In other words, staking more small businesses might be in the near future.
Along with the NSBA, the National Federal of Independent Business, or NFIB, cited increased access to capital as a likely consequence of the rollback. In a letter to lawmakers, Juanita D. Duggan, the NFIB's president and CEO appeared confident the effort will pay off for business owners who've struggled to get bank financing. "This legislation will help to improve the regulatory environment under which community banks currently operate, enabling them to enhance services for America's small businesses," she writes.
Naturally, approval for the revision of Dodd-Frank runs strong at NFIB, where a 2017 survey revealed that 82 percent of its members supported a revision by Congress of the Dodd-Frank Act to allow community banks greater flexibility when determining whether to make a loan, according to the letter.
Although support for the rollback echoes far beyond the confines of Wall Street, the jury is still out for the many Democrats who voted against altering Dodd-Frank--with many voicing concerns over the potential downsides of lifting certain regulations.
The partial Dodd-Frank repeal may not have unanimous backing on the floor, but the argument in favor of small-business owners seems to hold ground. Whether it will actually foster economic growth for small-business owners remains to be seen.