“That would be a mistake,” said Frank in an interview.
“Financial institutions are very negative about it, unfairly to the degree that they are,” Frank said. “If you have someone who is so opposed to the people who are being regulated, it doesn’t work smoothly.”
“If she is not vice president, I would rather see her retain the power of legislation in the Senate,” Frank said, adding that he is “very confident” that Biden will defeat Trump.
Analysts have said that Warren would be a nightmare for Wall Street because his nomination would increase the threat of aggressive regulation.
“This prospect would create great anxiety in the financial markets, which she regularly rates as greedy and corrupt,” wrote Greg Valliere, chief US policy strategist at AGF Investments, in a note to clients last month.
Four more years for Powell?
Frank suggested that Biden, if he wins in November, should consider keeping one of President Donald Trump’s most prominent appointments: Jerome Powell, chairman of the Federal Reserve.
“Powell has been Trump’s best designate, even though Trump yells at him all the time,” said Frank.
“Powell has been good, both in monetary policy and in the regulatory aspect,” said Frank. “There is something to be said to support confidence by sticking with it.”
Dodd-Frank, 10 years later
If Biden wins, Frank does not anticipate an impulse to impose a significant amount of financial regulation. Rather, he predicted a “more vigorous use of the powers that are there.”
Frank, who withdrew from Congress in early 2013, argues that the resistance of American banks so far during the pandemic demonstrates the importance of Dodd-Frank.
“Trust in the financial system in the United States is excellent. It is partly because it is highly regulated,” said Frank. “There is confidence that the banks are well capitalized because they are regularly monitored.”
Although bank earnings are shrinking, analysts and economists are confident, at least so far, that banks have enough capital to weather the storm.
“The banks were very strong in entering this crisis. That was due to the regulations established after the Great Financial Crisis,” said Constance Hunter, chief economist at KPMG.
Banks could have collapsed without legislation, says Frank
Frank, who regularly keeps in touch with former Senator Chris Dodd, said that if it weren’t for Dodd-Frank, the economic consequences of the pandemic would have been much worse this spring.
“If we hadn’t passed Dodd-Frank, there would have been a significant set of financial institution collapses that made matters worse,” Frank said. “People would lose money and the system would be shut down.”
That does not mean that a financial crisis cannot yet happen.
“If the pandemic caused a financial crisis, it won’t be because of something specific to the structure of financial institutions or regulation,” Frank said. “It will be because the economy in general is so depressed that nobody has enough money and the failures multiply.”
Most of Dodd-Frank is intact
While Republicans and bankers opposed Dodd-Frank because they feared it would be too heavy, the debate today is largely focused on the margins of the law, they do not completely disembowel it. After years of adjusting to Dodd-Frank, bankers have largely embraced him, with some even applauding him.
King even praised the CFPB, the creation of Warren that was created by Dodd-Frank, as a “very good agency” at its “core”.
After taking office, Trump promised to do a “large number” at Dodd-Frank. But after three years, the law is “almost completely intact,” Frank said.
Some adjustments have been made.
“What happened was that Trump discovered that he was much more sensible than he thought,” Frank said. “And there was not a great demand from the financial industry to get rid of it.”
.
