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President Trump: Dodd-Frank keeps banks from lending

Some argue the numbers say otherwise

Regulatory reform is a hot topic for the current administration as the president and members of his cabinet seek to cut back on regulations and ease lending standards. 

On Friday President Donald Trump continued his criticism of the Dodd-Frank Wall Street Reform and Consumer Protection Act, saying that the law prevents banks from lending, according to an article by Jim Puzzanghera for the Los Angeles Times.

From the article:

“We expect to be cutting a lot out of Dodd-Frank because, frankly, I have so many people, friends of mine that had nice businesses, they can't borrow money," Trump told leading corporate chief executives, including Jamie Dimon of JPMorgan Chase & Co. and Larry Fink of money management giant BlackRock Inc., meeting at the White House earlier this month

"They just can't get any money because the banks just won't let them borrow it because of the rules and regulations in Dodd-Frank," Trump said.

However, one critic argues that there is no data to back up this claim. In fact, the Federal Reserve shows that industrial bank loans increased 77% since October 2010.

From the article:

“Nobody’s come up with really solid evidence that they can point to that bank lending over the last few years has been overly constrained,” said Fred Cannon, global director of research at investment bank KBW. “It certainly is not growing as fast as it was pre-crisis, but I’m not sure everyone wants no-doc, low-doc, non-verifiable lending again.”

But still others argue that the change can’t be seen in mere numbers, and that the increase in regulations is felt more in the types of loans banks originate, and for whom they are originated.

From the article:

“A lot of the terms that have come from Dodd-Frank do not give us as much flexibility as we have had in the past to extend credit to our customers,’ said Jeffrey K. Ball, chief executive of Friendly Hills Bank in Whittier.

“Knowing my community and knowing my borrowers, I would love to be able to extend that credit,” he said. “But from a risk standpoint, it elevates the hurdles you have to clear.”

Either way, Trump is already well on his way to try to dismantle Dodd-Frank. On Friday the president signed yet another executive order – this time on regulatory reform that would cut the number of existing government regulations.

This executive order was a follow up to his January executive order on regulatory reform, taking it to the next level.

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