Understanding Your Finances – Dodd Frank (UPDATE)

Understanding Your Finances – Dodd Frank (UPDATE)

Keith Springer

Most of my readers are young adults.  At least that’s the audience I am targeting so I hope you are.  When you’re young the last thing you want to be thinking of is retirement.  But the truth is, this is the best time to do it.  A little bit can go a long way when you can anticipate having many years ahead of you.

With that in mind I want to speak to you about something that is happening under the Trump administration.  Republicans have, for a long time, done everything they can to benefit businesses while selling it as helping the American public no matter how much of a lie it was.  Republicans have gone after every business regulation they can.  The more a business can shaft its workers the more money it makes.  This is why workers have to have protections.

But that’s not the only place where the public needs to be protected.  The loosening of regulations allowed banks to make some very shaky deals which eventually ended in a huge crash for our economy.  After that Obama signed Dodd Frank to help protect consumers.  It is a piece of legislation that forces Wall Street to reform.  The Trump administration and Republicans are getting ready to attack it through executive orders.  You need to understand a little about what it does for you to understand why this is a huge problem.  Not only does Dodd Frank stop a lot of predatory practices but it also forced brokers to put their clients first.

What was happening was businesses were going to brokers and saying if you get people to buy our stock we’ll pay you a bonus.  Quite often those stocks were part of 401k’s which are retirement accounts.  Instead of recommending stocks geared towards the type of growth the particular 401k was set up to achieve the broker would buy as much as he could of the stock where he would earn a bonus for the retirement funds he managed.  Retirement accounts were ending up with stock that was practically worthless and that had never had any real possibility of increasing in price.  The business came out ahead because it got your money.  The broker came out ahead because he got the bonuses.  The people in the retirement fund who were faithfully putting in money out of every paycheck would lose everything.

Dodd Frank put an end to that.  Under the Dodd Frank Fiduciary (relating to, or involving a confidence or trust) Rule brokers were required to put their client’s interests first.  They could no longer take advantage of their customers without facing criminal charges.  People could realistically dream of sitting out in a chair overlooking a lake and just taking in the beauty of it without having to worry about where the money would come from to pay the bills.  All that is in jeopardy thanks to the Trump administration and the Republicans.  The want to take away the fiduciary rule so that brokers can go back to taking advantage of workers who are paying into retirement funds.  Elections have consequences that affect the plans you make in life.  It’s why voting matters.

UPDATE:  The Trump administration and the Republicans in Congress have removed the Dodd Frank protections that we’re keeping our money safe.