WASHINGTON - Republican Mitt Romney is pledging, if he is elected president, to repeal the Dodd-Frank financial regulations, a position favored by donors on Wall Street who have sent millions the candidate’s way. But he is nearly silent on how - without the regulation - he would prevent Wall Street from once again engaging in the risky practices that helped cause the 2008 financial crisis.
The gap in Romney’s platform - made more notable as, at every turn, he criticizes President Obama’s handling of the post-meltdown economy - has puzzled some economic specialists.
“He’s asking for permission to govern the country - but he’s saying do away with the government’s response to the Wall Street crisis,’’ said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University. “I’m no fan of Dodd-Frank, but I am a fan of the notion that we have to do something. He ought to be throwing out some replacements, some proposals of what he would do different.’’
Named for its authors, including Representative Barney Frank of Massachusetts, the 2010 Dodd-Frank law imposes an extensive array of disclosure and reporting rules, risk restrictions, and new oversight measures that are supposed to keep Wall Street banks and investment houses in check.
Banking and investment firms lobbied heavily against the legislation as Frank and Senator Christopher Dodd, a Democrat of Connecticut, guided it through Congress. The industry objects to the new rules and restrictions, and Romney said in May 2011 that the law “scared the dickens out of the financial sector and caused banks to pull back from lending.’’ He has joined his Republican presidential rivals in calling for an outright repeal of the legislation.
Romney has criticized both the Consumer Financial Protection Bureau, which is designed to monitor things like credit card applications and home mortgages, and the Financial Stability Oversight Council, which is supposed to monitor for systemic risks in the markets. Romney says both are too powerful and run by unelected bureaucrats.
Romney’s most detailed economic proposal, a 59-point plan released by his campaign in September 2011, denounces the Dodd-Frank bill as regulatory overreach. While calling for repealing and replacing the complex, 2,000-page law with a “streamlined regulatory framework,’’ it suggests only the broadest of themes: greater transparency of interbank relationships, enhanced capital requirements, and unspecified “provisions to address new forms of complex financial transactions.’’
Romney’s campaign did not respond to a list of questions from the Globe about specific ways he would change the law.
Lawrence Summers, a key White House economic adviser at the time the bill was drawn up and a former president of Harvard University, said that although there is room for debate about how Dodd-Frank should be implemented, it would be a grave mistake to wipe out the regulation without a strong replacement.
“The idea that we should go back to the regulatory status quo that preceded the worst financial crisis in 75 years seems on the edge of ludicrous,’’ Summers said.
Getting a repeal through Congress could be difficult for Republicans, even if Romney is elected president, because it is extremely unlikely Republicans will capture a filibuster-proof majority in the Senate in the 2012 elections. Still, there have not been many strong public advocates for the law. Dodd retired several months after the law passed, and Frank is retiring at the end of this year.
“Dodd is gone, Frank is going, and the Obama administration has been relatively quiet on this issue,’’ said Michael Greenberger, a professor at the University of Maryland and a former director at the Commodity Futures Trading Commission. “A lot of this goes back to the fact that I don’t think the public really ever understood what Dodd-Frank did.’’
The biggest share of Romney’s campaign contributions come from sources in the investment, securities, and insurance firms. Through the end of March, Romney had collected $10.7 million, or 12 percent of his total, from individuals and organizations in the sector. That is more than twice the amount Obama has gathered from the sector.
Donors are also giving far more to the super PAC supporting Romney than they are to the one supporting Obama. Restore Our Future, which backs Romney, has received $22.2 million from Wall Street, 43 percent of its total. The super PAC Priorities USA Action, which backs Obama, has collected just $525,200 from Wall Street.
Kevin Landry, vice chairman of Boston private equity firm TA Associates Inc. and a donor of $80,000 to Restore Our Future, called Dodd-Frank “government regulation run amok.’’
“It’s costing us $600,000 a year to comply with it, and it’s money down the drain,’’ Landry said. But he said his support for the super PAC never hinged on Romney’s opposition to Dodd-Frank.
Romney backers said the many donations from Wall Street are logical, given the candidate’s own business background, and that it will not influence his decisions on issues like Dodd-Frank.
But Democrats accuse Romney of irresponsibly pandering to his Wall Street contributors.
“I don’t think they had to buy him. I think he sold himself to the right wing,’’ Frank said. “The money from Wall Street is the icing on the cake, and the cake is the right wing.’’
“If he repeals the bill, what would he put in its place?’’ added Frank, former chairman of the House Financial Services Committee. “Does that mean derivatives stay unregulated? That AIG can go back into business? Politically, he’s afraid to outline the specifics of any regulations.’’
AIG, or American International Group, an insurance firm threatened with insolvency in 2008, was among the major financial firms that received a government bailout.
Even some trade groups are not gunning for full repeal of the legislation, even though the financial services industry spent hundreds of millions of dollars on more than 2,500 lobbyists in its fight against the law’s passage.
“We are supportive of making some targeted changes to Dodd-Frank on those areas where the policy will have a negative effect on the US economy,’’ said Scott Talbott, spokesman for the Financial Services Roundtable, an industry trade group.
For example, the industry advocates repeal of a provision that required the Federal Reserve to institute price controls on debit card fees, Talbott said. It also has concerns about provisions regulating derivatives and banning banks from trading stocks for their own benefit, he said.
More likely, Romney would attempt to loosen current regulations or delay ones that are proposed.
“In terms of immediate impact in the first two years, I think it will be an easing on regulations,’’ said Peter Morici, a conservative economist and professor at the University of Maryland. “Repealing, you probably won’t be able to do.’’