WASHINGTON — There were no birthday cakes or celebratory singing. Instead, the anniversary of the Dodd-Frank Act on Tuesday was commemorated with what the law does best: engender constant debate.
Five years after President Obama signed into law the biggest financial reforms in decades, one of the law's namesakes — former House Financial Services Committee Chairman Barney Frank — said the overhaul corrected key flaws that led to the crisis. But the day also featured more attacks by key Republicans, warring tweets from presidential candidates and another pledge by President Obama to defend the law.
Here are some takeaways:
The law's authors have few regrets.
A day after appearing at an event with the law's other chief author, former Senate Banking Committee Chairman Chris Dodd, Frank said Republicans' argument that the legislation has injured the economy is "very hard to make."
Despite this "'job-killing bill,' the only time we have seen better progress in reducing unemployment was during the nineties with the Clinton administration," Frank said during a discussion at an event hosted by Third Way, a centrist think tank. "This was not a bill to do positive things. Someone may say, 'Well, you're claiming credit for the economy.' No, absolutely not. There's a distinction. We were able to do some corrections of abuses without hurting the economy."
Frank said as a result of certain provisions, "too-big-to-fail" is "not nearly as much" the threat "as it was before." He credited reforms to mitigate the risks posed by large firms, including authority for the government to manage the dissolution of a failed giant and a tougher supervision regime for such firms.
Yet he acknowledged the law was not perfect. Frank said he wished the legislation could have resulted in a merger of the Securities and Exchange Commission and the Commodity Futures Trading Commission. He also voiced support for letting the law's $50 billion asset threshold for designating banks as "systemically important" rise gradually over time, and said there could be clearer exemptions in certain areas for community banks.
But he also said smaller banks are "overly compliant with the law" after being told by lawyers that "they've got to do more than they need to do." He added that the GOP says its regulatory relief proposals are meant to help community banks, but he noted that the biggest change since the law was enacted helped only the largest institutions.
"What the Republicans are doing very cleverly is using small banks as a bait and switch," Frank said. "They talk about how the bill has been terrible for the small banks. But when they actually got one chance to legislate, they passed an amendment that deals with the requirement that you move the swaps activity out of the bank into a separate subsidiary. The number of $3 billion-asset banks that have swaps is zero."
However, Frank also distanced himself from more strident calls by liberal Democrats — including Sen. Elizabeth Warren, as well as presidential candidates Martin O'Malley and Bernie Sanders — to break up the big banks by restoring the 1930s-era Glass-Steagall.
"Even if you did do Glass Steagall, you would still have institutions that were too big to allow them to fail without consequences," he said. "If you cut Citicorp or JPMorgan Chase or Bank of America in half, then you would have two institutions that are still too big to fail."
Republicans still abhor Dodd-Frank and will continue to push for changes.
Yet in other Washington events commemorating the five-year anniversary, the two GOP lawmakers who now hold Dodd and Frank's leadership posts continued to blast the law.
Banking Committee Chairman Richard Shelby, R-Ala., said Dodd-Frank enshrined, rather than ended, the too-big-to-fail system of taxpayer bailouts that were the hallmark of the 2008 financial crisis.
Speaking before the Heritage Foundation Tuesday, Shelby called taxpayer bailouts "the root moral hazard in the financial system." While the 2010 law failed to eradicate that hazard, he said, it also created an elaborate and costly regulatory structure that has caught harmless small banks and other businesses in its net with little benefit.
"The current regulatory framework assumes that too-big-to-fail is both automatic and unavoidable, instead of asking what it can do to reduce systemic risk," Shelby said. "Instead of reducing systemic risk, Dodd-Frank has actually encouraged the biggest banks to become larger and more concentrated."
Meanwhile, Financial Services Committee Chairman Jeb Hensarling, R-Texas, spoke at an American Enterprise Institute event where he said Dodd-Frank has led to risky firms getting bigger and argued that the law "codifies" bailouts. He added that the resolution facility created to wind down failed institutions will end up costing taxpayers and community banks are suffering the consequences.
"From Wall Street's point of view, Dodd-Frank may not be such a bad deal after all," Hensarling said. "The big investment houses can help shape regulations guaranteeing taxpayer bailouts for themselves while stifling their competition and grabbing market share."
Responding to a question at the AEI event, he said Democrats have been the obstacles to providing relief from the law for smaller institutions.
"Particularly when it comes to regulatory relief for community financial institutions, we have attempted to work with Democrats," Hensarling said. "Unfortunately, Dodd-Frank again appears to be sacred text among some Democrats."
In another sign of the intense debate over Dodd-Frank five years after it became law, Obama focused his comments on defending against efforts to gut it.
"I will not accept any efforts to roll back this law or its strong protections for our economy and the American people, including our military families," Obama said at a press conference where the president also unveiled new protections as part of a separate regime for military borrowers.
The real battle over the law's future may play out on the 2016 trail.
Several candidates on the campaign trail commemorated the anniversary on social media.
Candidates for the 2016 GOP presidential nomination heaped on criticism of the law. Former Florida Gov. Jeb Bush tweeted
#DoddFrank locked in "too big to fail" for Wall Street & hurts small community banks. 5 years is enough. We should repeal.
— Jeb Bush (@JebBush) July 21, 2015
Sen. Marco Rubio, R-Fla., echoed that sentiment in his own tweet:
Dodd-Frank has crippled community banks & increased the cost of lending for too many Americans. RT if you agree! https://t.co/e8jeu5ZAUk
— Marco Rubio (@marcorubio) July 21, 2015
But on the other side of the political spectrum, Democrats supported Obama's comments by saying they would defend the law as president while also pushing for even tougher reforms.
Dodd-Frank was enacted 5 years ago today & has been under GOP attack ever since. As president I'll defend Wall Street reform & go beyond. -H
— Hillary Clinton (@HillaryClinton) July 21, 2015
A message from O'Malley's Twitter handle conveyed the message that he wanted to go further:
Happy anniversary Dodd-Frank: you aren't strong enough, but don't worry, I won't let up on Wall Street reform. pic.twitter.com/a3cbAPfj3q
— Martin O'Malley (@MartinOMalley) July 21, 2015
John Heltman and Ian McKendry contributed to this article.