Between the Trump administration’s 50-year mortgage proposal, a $200 billion credit card swipe fee settlement, and the government determining that the Consumer Financial Protection Bureau’s current funding mechanism is unlawful, there is plenty to talk about in the banking and financial services world. Fortunately, the Taxpayers Protection Alliance recently released Too Safe to Succeed: How Financial Regulation Undermines Prosperity, an eye-opening, comprehensive new report taking a comprehensive view of the state of financial services regulation.

The report’s release comes as Americans are feeling the pinch of tighter credit, rising costs, and uncertainty in financial markets. It shows how financial regulations affect both consumers and businesses. From Dodd-Frank to cryptocurrency regulation and everything in between, TPA examines how financial regulations prevent the flow of capital and stifle growth and prosperity. Below are a few excerpts from our wide-ranging report:

Dodd-Frank: A Law Too Big to Fail
Some regulatory regimes seem too big to fail. They become so expansive, and so thoroughly entrenched, and serve so many special interests, that true reform seems near impossible. This is the story of the Dodd-Frank Act of 2010, enacted after the financial crisis of 2008. 

A law’s “comprehensiveness” does not necessarily indicate practicability. Despite its immense length—2,300 pages—Dodd-Frank nonetheless left much up to the bureaucrats that enforced it, creating economic uncertainty in its wake. As summed up by Diego Zuluaga:

Dodd-Frank did much more than attempt to curtail bad practices. It eliminated previous regulatory agencies and added a slew of new ones. It established a fresh regime for banks deemed of systemic importance. The law also altered mortgage lending rules, seeking to better reflect the risk of these loans on bank balance sheets. It introduced new regulations on consumer lending, including a cap on debit card fees. It mandated the registration of hedge funds and required added disclosures for traded securities.

Dodd-Frank was a technocrat’s dream in its breadth and scope. No crisis-era stone was left unturned, and a great many other future contingencies were addressed.

This sprawling imposition slowed recovery from the 2008 financial crisis—the very crisis to which the law responded. “A 2013 Federal Reserve Bank of Dallas study showed that the GDP recovery from the recession that ended in 2009 has been the slowest on record, 11 percent below the average for recoveries since 1960,” reported Peter J. Wallison of the American Enterprise Institute. Congress in its more reflective moments might have thought something along the lines of this immortal quip from the Duffel Blog: “Whoops, our bad.”

Vindicating the notion that regulatory burdens fall heaviest on small players, which lack the resources to shoulder them, Dodd-Frank seems to have contributed to the centralization of American finance. It eviscerated the number of new banks seeking charters. Further metrics suggest that the law has harmed homebuyers, homeowners, and low-income Americans prone to losing access to banking services.

Small businesses also suffered, as small-business lending declined. One report from researchers at Rutgers and Oberlin and the Federal Reserve Bank of Dallas found that “Bank survey results…indicate that bank credit standards for making [commercial and industrial] loans became relatively tighter for small businesses compared with medium- and large-sized firms during the period when [Dodd-Frank] requirements were most onerous on smaller banking organizations.”

Dodd-Frank also risked the data privacy of millions of Americans. Section 1033 of the law mandated that financial institutions allow consumers unlimited access to their data. While the theory behind this provision was that it would allow customers to more easily access their information to take their business to competing institutions, the results have been disappointing. The beneficiaries are large aggregators who build a business model off accessing this free data and then monetizing their treasure trove for profit.

The CFPB promulgated a so-called “Open Banking Rule,” which interpreted Section 1033 to mean that any and all actors seeking to access this data ought to have unlimited, zero-cost access, regardless of the compliance costs foisted upon America’s banks. This left myriad gaps for privacy protections that could be more easily exploited by malicious third parties. Studies have shown that roughly 90 percent of data access requests come from such aggregators without a corresponding consumer request behind it. The Open Banking Rule was not about consumer protection.

Fortunately, the CFPB under the second Trump administration moved to scrap the Open Banking Rule in May of 2025. This will allow industry-led efforts on consumer privacy protections to continue apace. While some have tried to demagogue this rollback as a backdoor ban on cryptocurrencies and digital wallets, nothing could be further from the truth. Repealing the (relatively) new rule will merely prevent unnecessary access to information but preserve open access for actual users and consumers.

The ESG Wars Have Begun
Fiduciary duties place clear constraints on the activities of investment managers, who must maximize pecuniary gain while accommodating for risk. Public companies—within what Milton Friedman called “the basic rules of the society, both those embodied in law and those embodied in ethical custom”—must deliver the best possible returns to their shareholders.

These basic notions form the very foundation of the American economy. They ensure that all American investors—regardless of economic status—see the maximal returns on their investments. Countless Americans have built their savings and retirements on this foundation. “Some 72 percent of the value of publicly traded companies in America is owned by pensions, 401(k)s, individual retirement accounts, charitable organizations, and insurance companies funding life insurance policies and annuities,” former Senator Phil Gramm and policy expert Mike Solon noted in 2022.

Despite the success of the current model, solely pecuniarily focused fiduciary duties have fallen from favor among many on both the right and the left, albeit for different reasons. Worse still, both sides of the aisle have attempted to enlist government power in their partisan battles.

Regulatory Promotion of ESG and International Groups
The bogus assumption that pursuing ESG-based investing will not shrink returns has prompted lawmakers to protect the practice. For example, under President Joe Biden, the Department of Labor issued updates to the “prudence and loyalty” requirements of the Employee Retirement Income Security Act (ERISA). Although the alterations had a far smaller effect than either proponents or opponents wanted to admit, they—and the rulemaking process itself—unquestionably served as “an advertisement that the executive branch—for the moment, at least—want[ed] more ideologically progressive investing,” as put in Reason at the time.

The federal government has also provided staggering subsidies for green-energy projects, making such projects seem far more feasible and attractive than they are. Despite these subsidies, the movement to build green-energy infrastructure is floundering.

Internationally, foreign countries’ pro-ESG regulations and networks of financial institutions, such as the Net Zero Banking Alliance, have further diverted capital flows from their proper courses. Europe’s regulatory devotion to net-zero policies has wreaked havoc, both on the continent and globally. The goliaths of the financial industry committed themselves to ESG principles, harming their clients and investors and distorting the global market.
 
 
BLOGS:

Monday: New TPA Report Exposes WHO’s Double Standards on Harm Reduction in Asia-Pacific
 

Wednesday: Colorado Medicaid Mismanagement Raises Concerns and TPA Applauds Impending End to Costly Government Shutdown
 

Thursday: The World Health Organization Misses the Mark on Tobacco Harm Reduction 

Friday: The Case for and Against Remaining in the World Health Organization

Have a great weekend!



David Williams
President
Taxpayers Protection Alliance
1101 14^th Street, NW
Suite 500
Washington, D.C.
Office:  (202) 930-1716
Mobile:  (202) 258-6527
www.protectingtaxpayers.org