Middle America banks unlocked from Dodd-Frank shackles

Congress has unshackled many of the medium-sized US banks from the onerous Dodd-Frank law, put in place after the 2008 financial crisis.

The House voted 258-159 to approve the legislation, which the Senate passes back in March. The bill now awaits for President Trump’s signature.One of the major rollbacks in the bill is the raising the bar on the level of assets to $250 billion before the bank is considered systemically significant from $50 billion.

The change eases regulations, financial filing requirements and oversight on more than 25 financial institutions, including BB&T Corp., SunTrust Banks, Fifth Third Bancorp and American Express. These institutions will no long need to perform under the Federal Reserve’s annual stress tests as well.

The bill indirectly will allow these banks to ramp up mortgage lending and proprietary trading operations with the cash hoard sitting on their balance sheets and at the Federal Reserve, since they will no longer be considered being a systemic risk.

Part of the Dodd-Frank law had financial institutions deposit excess reserves at the Fed as the first line of restitution should a firm falter.

Should we be concerned this morning? No. But sometime shortly down the road we could see something short of consolidation of these firms with larger Wall Street banks in order to  get access to their additional lending revenue.

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