Law from 2008 Financial Crisis May be Undone

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There’s a bill brewing in Washington that could have a lasting effect on Arkansas.

A proposed change currently in the house could be a blessing for small business owners, farmers and families.

People lost their homes, life savings and livelihoods in the 2008 financial crisis. So the government stepped in to make sure that never happened again. A decade later, those preventative regulations could soon be out the door.

“The big issue is when you let really large banks engage in risky behavior,” said Mervin Jebaraj, the director for the Center for Business and Economic Research at the University of Arkansas.

Financial experts will say questionable financial decision-making is what led to The Great Recession.

“After the 2008 financial crisis, there was a lot of interest in making sure that thing did not happen again, so they put in rules for banks to follow in how they are lending,” Jebaraj said. 

As a result, the government put into place reforms called Dodd-Frank Act, which added regulations to how all banks, no matter the size, lend their money.

“Banks that are too big to fail, the big, national, multinational banks, those are, by and large, not the banks you’ll see here in Arkansas,” Jebaraj said. 

The senate has passed a proposed rollback to Dodd-Frank, which could significantly help out community banks across the Natural State.

“They should be able to loan into their communities with slightly more relaxed rules,” Jebaraj said. 

It’s a move federal lawmakers from Arkansas stand behind.

Senator Tom Cotton says Dodd-Frank is “deeply unfair.” Senator Boozman called for an end to “one-size-fits-all rules.” 

As for the banks, they see this as a great thing.

Cynthia Schneider, with the Bank of Fayetteville says, in part, “it would clearly relieve some regulatory burdens on community banks in the state of Arkansas. We feel strongly that community banking is important to the citizens of our state, so we’re hopeful for a positive outcome.”

While the financial crisis in 2008 was primarily related to the failure of the housing market, Mervin Jebaraj says rolling back Dodd-Frank shouldn’t really affect U.S. real estate.

Copyright 2021 Nexstar Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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