After the meltdown of the financial market in 2008 -2010, the Dodd-Frank financial overhaul took place in 2010. The Banking Deregulation Bill was finally passed after years of bipartisan effort. The Banking Deregulation Bill will provide regulatory relief for small banks. The bill is also called the Economic Growth, Regulatory Relief and Consumer Protection Act. It will change the size of the banks that are subject to the federal regulatory scrutiny. The bill rolls back a lot of regulations introduced by the Dodd-Frank Act.
The Banking Deregulation Bill’s purpose was to create a framework for oversight of the banking system responsible for the 2008 financial crisis and the economic downturn that resulted from basically the behavior of unscrupulous speculators. The Bill aims to help consumers gain easier access to credit and as a boon to regional banks by freeing them from burdensome regulations. The crucial part of the legislation involves the increase in the level at which a financial institution is considered a systemically important financial institution or SIFI – which subjects institutions to more oversight than other banks not given this designation. It would drop the number of SIFI designated institutions from 38 to just 12.
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The aim is to start small with local community banks and then proceed to larger banks. The purpose of the Banking Deregulation Bill is to make sure that if a bank makes bad loans, or if customers can’t pay, the banks won’t lose. Their customers will pay, or the government will pay. This socializes the losses. The real purpose of this regulatory rewrite is to make sure that the government can bail out the banks’ bondholders and even bail out the stockholders as well as the banks themselves. As banks make more and more loans, the carrying charge goes up, and the rents go way up. This is counted as an increase in GDP.
The Volcker Rule has been amended. An Off-Ramp relief has been created for qualifying community banks. It aims at providing relief from stress testing for banking organizations and much more. On 24th May 2018 President Trump signed into law the most significant legislation the Banking Deregulation Bill.