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Barney Frank’s Dig Against Republican Congress Could Backfire on Whistleblowers

Oh my, Barney Frank decided to challenge Congress regarding his eponymous legislation the Dodd-Frank Act.  He’s only been out of Congress a little while, but he sounds like an angry constituent in this quote from Bloomberg news:

“I know the chairman said the financial reform bill is as damaging as the health-care bill,” the now-bearded Massachusetts Democrat said, referring to the current Republican chairman, Jeb Hensarling of Texas. “Well my recollection is this Republican Congress votes on a fairly regular basis to repeal the health-care bill. But where’s your bill to repeal the financial reform bill? If you have the courage of your convictions, bring it on.”

Well, first of all no, don’t bring it on.  Much as I know the former congressman does not want the bill repealed and said this for the sheer joy of ribbing his former colleagues, some caution is required.  Some of these distinguished congressional members might actually repeal any regulation for any business at all, let alone a law as complicated and misunderstood as Dodd-Frank.  Daring these people could be a dangerous game even for the former committee chair.

Most especially, please let’s not repeal the part of the Dodd-Frank law that gave us the new Securities and Exchange Commission whistleblower program.  Just last week, many in the whistleblower community have been petitioning the SEC to strengthen whistleblower protections.  If you repeal Dodd-Frank, you repeal the protections that exist under the law to report such violations. That means violations of any kind of securities fraud may be hard to uncover.  Hard might even be an understatement. Without whistleblowers, you won’t uncover most securities fraud.

In the meantime, according to the live blog of the hearing, one major effect attributed to the law by its strongest critics is that free checking is becoming harder to find.

Could I make that up? The banks aren’t offering free checking anymore (does anyone use checks anymore) and it’s all Dodd-Frank’s fault.  Now maybe you don’t like Barney Frank. Maybe you were cheering when he retired from Congress.  But really, Barney Frank and Chris Dodd did not take away your free checking.

There are those who claim banks must now spend more on compliance. There seems to be little concern that having no rules with which to comply, or at least very few rules, got everyone into the mess of a recession we are only now leaving.

That, of course, is the big picture. I’m looking out for the micro in this macro world.  I’m looking to be sure that someone who is legitimately concerned that they have encountered a securities violation has a way to report it to the SEC. I’m looking to be sure that when they do report those violations, they will be protected under law and maybe even rewarded for having the courage to come forward. Does that seem like too much to ask? It probably is if your primary concern is that free market competition to create free checking is not enough of an incentive for banks to be good to customers.

Without the ability of a whistleblower to tell the SEC what is going on in these large institutions, how will the commission ever learn anything from the inside? That is my concern. In a financial world brought to its knees by all manner of horrendous practices not seven years ago, you would think having a way for people to report fraud would be applauded.