What You Ought to Know About the Dodd-Frank Act

By John Maxfield Markets Fool.com

You'd be excused for thinking that the Dodd-Frank Act of 2010 is old news. Yet, it's once again in focus, with the new presidential administration vowing to dismantle it in an effort to free up banks to lend more and thereby accelerate economic growth.

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Listen in on this week's episode ofIndustry Focus: Financials, where The Motley Fool's Gaby Lapera and John Maxfield discuss the ins and outs of one of the most significant pieces of legislation passed in the past decade:why it was created, what it does, why so many people and politicians are less than pleased with its implementation, how likely it is to change under Trump's administration, and much more.

A full transcript follows the video.

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This podcast was recorded on Feb. 13, 2017.

Gaby Lapera:Hello,everyone!Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. You arelistening to the Financials edition,taped today on Monday,February 13th, 2017. My name is Gaby Lapera,and joining me on Skype is John Maxfield,banking specialist. How's it going, John?

John Maxfield:It is going great, Gaby! Always happy to be with you.

Lapera: I am..."excited" is the wrong word for this show. We'regoing to talk a little bit about politics today,folks,and every time we talk about politics,I get heartburn. I am sitting here with a case of heartburn right now. Itdoesn't matter which side of the aisle we're talking about,politics makes my acid churnin my stomach. It's no good.[laughs]

So, today, we'regoing to talk about the Dodd-Frank Act. Thefull name, by the way, is the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. It'sbeen in the news a lot lately because President Trumpsigned an executive ordermandating that the Department of the Treasury produce a report on whether or notexisting laws --and when we say existing laws, what you should think here is Dodd-Frank -- are following the seven core principles that the Trump White House has laid out forregulating financial systems. There'sa lot wrapped up in here. But I think we should start witha quick history of financial regulation, and where Dodd-Frank grew from.I'm going to pass it off to you,Maxfield, because I know you like history a lot, andI think you did a good job summarizing it earlier when we were talking about it.

Maxfield:I think, whenever you're talking about financial regulation, it'shelpful to put it in perspective. So,here's how I think about it and how I would recommend our listeners think about it:After every major financial crisis, there'sa piece of legislation that tries to attackthe problem that caused that crisis. If you go back to, let's say,the Panic of 1907,out of that came the Federal Reserve Act, whichestablished the Federal Reserve. Then,you had the Great Depression. Out of the Great Depression,you had the Glass-Steagall Act, which,among other things, separated investment banking operations and commercial banking operations, and italso established the FDIC, whichprovides deposit insurance.

Then, there were a series of bankingcrises that we've talked about in the past on the show, in the 1970s and 1980s,out of which a number of really significant pieces of legislation came in order to, again,attack the problems that people believed caused those crises. Then,in the financial crisis of 2008-09, it was Dodd-Frank thatcame out of that to attack the problemsthat many people believed caused that crisis.

Lapera: Exactly. So,there's a lot of regulation that looks backwards in a hope toregulate forwards in the future, which is whereDodd-Frank came from. So, we'regoing to talk a little bit about Dodd-Frank now,what it actually means, but something to keep in mind is that Dodd-Frank is a very weightypiece of legislation --and I don't mean in terms of importance,although it is very important,or else we wouldn't be talking about it... although,I don't know, maybe you think we're just here to waste your time. In that case, don't listen to the podcast.[laughs]

But, no,this is actually a very long piece of legislation. What we'regoing to talk about now are the main points of Dodd-Frank -- so, the things that peoplethink about when it comes to Dodd-Frank, the things thatpeople are up in arms about when they're talking about this legislation,or the things that they're trying to protect. So,I think the first thingwe should start with is capital requirements andincreased liquidity, which kind of go hand-in-hand assomething that banks have been complaining aboutpretty much nonstop since Dodd-Frank passed.

Maxfield:Right. If yougo back to the financial crisis, thetheory was that what caused it, orat least, what accelerated it,was thatyou had these thingsthat were called "too big to fail banks." These weremassive organizations --Bank of America(NYSE: BAC), Citigroup(NYSE: C), Lehman Brothers,Bear Stearns, Goldman Sachs(NYSE: GS). Andthese banks were operating with anenormous amount of leverage.

In Lehman Brothers' case,it was something like $30 worth of assetsfor every $1 worth of equity. What that means is thatif those assets at a bank like thatfell only 3%,basically all the capital of that bank would be wiped out,and it would be insolvent,and therefore it would have to go into bankruptcy. So, thethought process was that we need toincrease how much capital banks hold,because if we increasehow much capital banks hold, they'll beable to absorb those losses that happen when we go through theseeconomic cycles. So, what they did with Dodd-Frank is they did a couple of things. First of all, thereally big banks, they carved them out and appliedheightened capital requirements to them, which means they have tooperate with less leverage. They also instituted --listeners have probably heard about these --annual stress teststhat tried to determine what would happento these banks' capitalon a yearly basis ifthe economy were to enter another financial crisis akin to the one in 2008. So,when they go through that crisis, they testwhat the losses would look likeat these banks, and how that would impact their capital, and whether,through that crisis, they would still be able to meet theseminimum capital requirements.

Then, on the liquidity side --here's a really interesting point about the crisis thatI think a lot of people miss: Insome of these cases,it wasn't just an issue of capital, orit wasn't even an issue of capital, but it wasmore an issue of liquidity,because you had all of these bank runs on these banks, and whilethey had enough capital, the assets they held weren'tliquid enough to turn into cashquickly enough to satisfy theirdepository run. So, what theregulators did was,on top of requiring banks to hold more capital, they'realso requiring them tohold a larger percentage of their assets inhighly liquid forms likegovernment securities, as opposed to loans,which you can't turn into cash very quickly.

Lapera: AndI'm going to interrupt you right here. Thereason that banks are upset about this is that if they havelarger capital requirements, meaning that they have to keep more cash in reserve, that means that they can't be using that money to make loans or dowhatever it is they were going to do with it that would actually make them money. Theyjust have to sit on it,which is upsetting to them,because before the financial crisis, thereweren't really that many limits on theircapital requirements,not like Dodd-Frank gave.

Andon top of that, with the increased liquiditygoing hand-in-hand with the capital requirements, it means that they have tonot only keep all this extra stuff around,all this extra money, butit has to be in a form that'seasy for them to liquidate. So,it can't be in loans, because a loanis a promise to pay back money over time, so they can't call in the loans right away. Ithas to be in a form that is very easy toreturn to consumers.

Maxfield:That'sa great point. When you think about what a bank earns on a loan,let's say it gets a 7% interest rate, or even a 5% on a loan, if you'rekeeping it in cash, you're not making any money. So, it really attacksthe core profitability of banks.

Lapera: Absolutely. Then,on top of that, you have these stress tests that they have to do.I don't think anyone disagrees that you should run what-if scenarios, but the banks are saying that it'sburdensome to thembecause it takes a lot of money to run thesecompliance tests.You have to pay a lot of people, and it takes a lot of time,and it's time and money that they could be spending making more money. So, they'reupset that they are instead spending it to bein compliance with these federal regulations.

Maxfield:Yeah,that's right. And also, if you look at thescenarios that the Federal Reserve tests these banks against, they'realmost like Great Depression-typescenarios. Now, that's a good thing, forbanks to always be prepared for downturns. If you're a bank, you have to always be considering,and you always have to have in the back of your head that a downturncould be coming down the road. But just, the extreme-ness of these tests makes these banks holdso much more capital, which then, on top of thatliquidity stuff, just reallydrives down their profitability.

Lapera: Right. And then,there's another prong to these stress tests andcapital requirements, which are resolution plans, which is that the biggest bankshave to tell the government regulatorswhat they plan to do for the next year, like,who are they planning to hire? What'sexecutive compensation like? Why are theyplanning on having a dividend? Andthe federal government can basically say yea or nay on a lot of these things.

Maxfield:I'm glad you brought that up. That's actually not the resolution plan,that's part of what's called CCAR,the Comprehensive Capital Analysis and Review process. I mean, there's all these things --

Lapera: No,you're totally right, I have my notes flipped.[laughs]

Maxfield:ButI'm glad you brought that up, because I'dforgotten to mention that. One of thepowers that banks lostas a result of Dodd-Frank was --any other company, the board of directors can sit down and say, "Wewant to raise our dividend this year," or, "Wewant to buy back more stock this year than we bought back last year." Because ofDodd-Frank, and the stress testsin particular, banks do not have thesole discretion to do that. They actually have to getapproval on an annual basis to increase their dividend or buy back more stocks. It's a reallyrestrictive regulatory scenario for these banks.

Lapera:And obviously anyone is upsetwhen they're told that this thing they used to be able to do, they can't do it anymore. It'sthe same reaction you see in humans across the board,whether it be a three-year-old who you catch finger painting on the wall, you're like, "Hey,that thing you were just doing,you can't do it anymore. I know you think it's pretty,but it's terrible." Or, you, when your doctor tells you, "Hey,I don't know if you noticed, but your cholesterol is really high, sono more cheeseburgers for you." Theimmediate reaction is, "Well,I don't like that!" whether or not it's good for you, or good for your walls, or good for youratherosclerosis. So,do you want to talk about resolution plans really quick?

Maxfield:Yes. Resolution plans. When Citigroup and Bank of America and Lehman Brothersand Bear Stearnsran into problems, because they're such big,complicated organizations,you can't just take them into bankruptcy like you would for, say, aconvenience store down the street. So,what resolution plans are... these are plans that the banks have to giveto the Federal Reserve every year thatbasically maps outhow you would bring one of these organizationsinto bankruptcy,in the event that that was necessary. So,the thought process is,if the road map is there,it would be a lot easier to do if it was necessary.

Lapera: Absolutely. And sincebanks likeCitibank orJPMorgan(NYSE: JPM) arevery complicated organizations -- well,some of them are --it means that this is,again, a lot of time and money being spent oncompliance stuff that they don't feel likethey should, because,I don't think most businessesplan on how they will fail. That's notsomething that most people spend resources on.

So, let'stalk about something that people are veryupset about: the Consumer Financial Protection Bureau,which was created with Dodd-Frank. TheConsumer Protection Financial Bureau issomething that's very new in America, at least inbanking regulation, it's aregulator that has the consumer's best interests at heart,as opposed to regulators who arelooking at banks and telling them, "Wereally want you to make sure you succeed,we don't want you to fail,here are the things we need you to do so you don't fail." This isanother regulatory agency that's saying, "That'sgreat and all,but you need tokeep the consumer's best interests in mind as well."

Maxfield:Andif you think about where itfits into the regulatory structure,you have the threePrudential Regulators. Those are the Federal Reserve, the FDIC, and the OCC,which is the Office of the Comptroller of the Currency. To your point, theirprimary duty is to oversee banks and make sure that the bankingsystem is safe and sound. The CFPB is a totally different entity. Itopened itsdoors and 2011, so it's been around for a little over five years. And as opposed to being motivated by the desire to make sure that the banking system, overall, is safe and sound, itsprimary focus is on consumers. This all goes back to the abuses that wereuncovered in the mortgage industry in the lead-up to the financial crisis.

Lapera: Yes. AndI just want to put something out there. Youmight be asking yourself right now: Why wouldanyone be upset about more consumer protections? AndI don't think anyone is upset about more consumer protections, except banks. But the agency, the way the bureau is structured,it could be a little bit better, both for banks and for consumers, and for thegovernment. Do you want to get into that, Maxfield? I know I cut you off, andI think you were about to get in there,but I wanted to preface that.

Maxfield:I'm really glad you prefaced that,because what I'm about to say is going to sound very critical of the CFPB, but I think the CFPB is a reallyimportant entity. Let me give you a tangible example of why. Before the financial crisis, before the CFPB came into place, the way that banks chargedoverdrafts on your checking account,here's what they would do:if you had a bunch of charges in a single day,let's say you had five charges for five cups of coffee at Starbucks,but then you had your mortgage payment that came out of that account, and let's say you bought those five cups of coffee and you had those fivetransactions earlier in the day,and then your mortgage payment was the last transaction that day, and let's say that mortgage payment kicked your account into overdraft territory -- so,you would have an overdraft fee on that transaction --what the banks would do was, they would rearrange the order of those transactions, and they would put that mortgage transaction first. So, whathappened there is that, as opposed to having one overdraft charge, you would have six overdraft charges. So, that is the type of thing that the CFPB was put into place to stop,because it's just egregiously taking advantage of consumers.

Lapera: Definitely. That's calleddebitre-sequencing,by the way, and I believe the CFPB haspursued a few cases,and there have been a few class action lawsuits about it,but it's technically still not illegal --fun fact I learned the other day.

Maxfield:That'sexactly right. It's not technically illegal. But the CFPB has gone after it, and banks have really backed off from it. But, to your point, the reason the CFPB is so controversial, there are twooverarching reasons. The first is that,unlike the other Prudential Regulators who have to balance the impact of their policies on economic growth, the CFPB doesn't have to do that. We'vetalked about the role that banks playin the economy on this show many, many times. But banksprovide fuel for economic growth. So, if you are cutting off the banks that fuel, you are going to impact economic growth. So,it's really important that these regulatory agencies aretaking into consideration, in the CFPB's case, bothprotection for consumers, but also,you don't want to cut off your nose to spite your face byimpacting the economic growth,because that will boost up unemployment,which will hurt those same consumers. You know what I mean?

Lapera:I thinkone of the things you're getting at here is thatsince the advent of the Consumer Financial Protection Bureau, banks have done stuff like beenmuch more conservative about who they lend money to. Andon the surface of this, you may think "Great,that's what they should be doing. They should be conservative lenders." But,on the flip side of that, you have thispopulation of people who are already underserved by banks, who maybedon't have the best credit, but if banks were willing to work with them,maybe they would be able to get a loan and pull themselves out of poverty, whatever it is --but banks don't want to lend to them anymore, because they know someone will come after them and say, "Look at all thisuntrustworthy lending you've been doing." And thatpushes those people to the marginsof the banking and financial structure,so they end up going to places like check cashers or payday loan places, places that potentiallydon't have as much interest in keeping the consumers above board.

Maxfield:Or, any interest in keeping them above board.[laughs]

Lapera:Yeah, or keeping them afloat in terms of financial things. Check cashers charge their fees up front, so if you fail, they don't really care,because they already have their money. But banks have an interest, in theory, in keeping you as a customer for a long time. In theory.

Maxfield:That's right, in theory.[laughs] Andthere's a lot of truth to that, but there are certainlyexceptions on the margin. Let me get to that second reason that the CFPB is so controversial. Unlike the other regulatory agencies -- at the FDIC, there's a board ofgovernors, there are five governors that weigh in on the policies, andthe same thing is true at the Federal Reserve,which has the Board of Governors, and at the OCC, the head of the OCC, he reportsdirectly to the President. So, there is either adispersion of authority at theseorganizations, or there's accountabilitydirectly to the political branch. Theproblem that the CFPB has is that it's apart of the Federal Reserve,which is an independent entity within the executive branch for monetary policy reasons. Thatprovides one layer of insulation between the CFPB and the political branch.

But there's an additional problem -- the CFPB is run by one person, not by a board. I don't want to overstate the case, but it's more like adictatorship as opposed to a parliamentary democracy. You know what I mean? So, that has people concerned. And then on top of that, because the CFPB can go out and find these banks a ton of money -- in the five-plus years it's been around, it'scollected something like $12 billion worth of fines, which means thatit doesn't have to be accountable even to the Federal Reserve for financing or to Congress for financing. It can produce its own revenue. So, there's this concern that, they don't balance economic growth, they're non-accountable, they can basically do whatever they want. And, in fact, a court has, just last year, held that thegovernance structure is unconstitutional, andthat will probably make its way up the chain of appeals courts. But, it really is alegitimate concern, how this thing is structured.

Lapera: Right. Like allpolitical things, there are shades of grey here. No one's saying -- well, some people are saying, but most people aren't saying "Get rid of all consumer protection." But, some people are saying, "Maybe the way that the CFPB is structured right now is notin the best interest of the nation." I want to move on to the next thing, which is the Volcker Rule,which I think a lot of people have heard about, but maybe don't understand. The Volcker Ruleprohibits proprietary trading,limits the relationship between banks and hedge funds,and I believe it also prevents banks from trading certain types of assets. Thisproprietary trading issomething that sounds like a buzzword,but it means something very specific, which is when the bank uses the bank's money to invest,instead of just facilitating investing for their clients.

Maxfield:That's right. Banks can'tgo out and act like a hedge fund anymore, where you'regoing out and buying super risky assets. What they can do now is serve as market makers, which means you'rejust facilitating. So, let's say you're aBank of America, for example, and you have theseinstitutional investor clients like aninsurance company that wants to sella whole bunch of government bonds that it owns. You can't just sell $100 million worth of government bonds,it's not like buying and selling a stock. Youhave to have somebody who'll actually facilitate that transaction. So, it will sell those bonds toBank of America, and then Bank of America will find a buyer for those bonds, so,it just facilitates that transaction. That's what market making is, and that's what the Volcker Rule limits bank's' rolein the capital markets to.

Lapera: Right. And banksmake their money from fees generated from that, andmaybe a commission or something. But before, withproprietary trading, they were actually taking consumers' money, likedeposits or whatever,and then investing in the stock market and saying, "Lookhow much money we made with your money!" Andthat leads to some very risky practices,like you saw before the recession, that ran his headlong into a concrete wall. Volcker Rule isreally interesting because a lot of people think we should justget rid of Dodd-Frank and go back toGlass-Steagall. Glass-Steagall was an act thatyou talked about earlier which established the FDIC in the 1930s. The Glass-Steagall Act,one of the most important components of it was that it prohibited banks from doing commercial/retail businesses, so, like,taking deposits and making loans, and having an investment house in it. So, it would haveprohibited the existence of banks, the way that they exist in their current form, like JPMorgan,which is a universal bank. It said that those twothings had to be completely separate, you couldn't have it under one house. Which is, I think, why some people want to go back to that. Maxfield,do you have some insight onto why?

Maxfield:Just,thethought process is, it's too risky to have these trading operations, these investment banking operations, on top of federally insured deposits. It just seems like the taxpayer shouldn't be financing these risky investments. It makes sense, in theory, why you would want to stop that. But here's what you would hear from bankers if you talked to them, particularly the bankers atBank of America and JPMorgan Chase and Citigroup. They say, "We have theselarge corporate customerswho needed a buffet of financial options. One of those financial options isbeing able to access the capital markets. If we don'tprovide that service within the strict regulatory confines of the banking industry, somebody else will provide those. And thatsomebody else will be outside of the strict regulatory confines of the banking industry. So, let's keep it in, let's keep it safe, let's allow banks to provide the whole buffet of options to these large corporate customers."

Lapera: Which is why the Volcker Rule is sometimes called Glass-Steagall Lite. That'sone of the things that they call it,because it's basically what it does. It says, "Youcan't do any of this proprietary trading, but market making is OK, because we do understand thatyou have to be able to do that." So then, theDurbin Amendment gotkind of tacked on to Dodd-Frank,which is why it's called the Durbin Amendment. The DurbinAmendment limited the amount thatdebit card processors could charge merchants in fees. In theory,it was supposed to save consumers money,but it hasn't really worked out that way so great.

Maxfield:Yeah, basically, to put it into formal language, every time that you run your debit card, the bank or the processor gets a little slice ofthat transaction in order to facilitate that transaction, and that slice is called the interchange fee. And the Durbin Amendment just put a cap on interchange fees.

Lapera:Anda lot of people are arguing thatthat's actually being passed on to consumers. We'll see what happens to theDurbin Amendment. People aren't as upset about this one,mostly because, I think, a lot of people don't know about it or understand it. So, that goes through the big bits of Dodd-Frank. We talked about why banks are upset, so let's talk about why regulators and legislators and the average citizen is upset. One of the charges that has been laid against Dodd-Frank's feet is that thefederal government now has aninability to intervene,should there be another financial crisis.

Maxfield:This goes back to the whole point of Dodd-Frank. It'snot so much that they have theinability to intervene, but it narrows their options and their powers in the event that they do have to intervene. Again, this allgoes back to the original purpose of Dodd-Frank,which was not only to prevent another financial crisis like the one in 2008, but to solve the "too big to fail bank" problem. The thought process was, if you tell theregulators that they can't rescue too big to fail banks,then the banks will do everything in their power tomake sure that they don't fail. It'sattacking the moral hazard problem, and it makes sense in theory, but likeanything, the devil is in the details.

Lapera: Absolutely. The other thing that you mentioned, thatI have heard multiple times, is that if the banks are too big to fail, that doesn't even make sense,if banks are not doing the right thing,we should just let capitalism do what capitalism does, and we should just let the banks fail, and we'll see what happens whenthe dust settles. It's not a great idea, in general.I know that there are some people here who really hate central banking who listen to this show. I've had emails from them. But, in general, not a really great idea to let yourentire economic system collapse. The problem with when these too big to fail banks collapse is in the name -- they're too big to fail because, when people make a run on them, when they collapse, there's no banking infrastructure left.

Maxfield:Here'swhat I would recommend to any listener who's thinking about this and who is opposed to this idea of bailing out big banks -- I agree, Gaby agrees, everybody agrees that bailing out these bankers when they get into trouble is a very unpalatable course of action today.These guys make a ton of money.

Lapera: It's not ideal, no.[laughs] But the other option...

Maxfield:Right. If youlook back in history,the thing that we know, and this is what Milton Friedmanbecame famous for, was thatwhen there is a contraction in the money supply,that is the thing that kicks you into a recession. And if there is a big contraction in the money supply,that is what kicks you into a depression. Banks are not ordinary companies. This is not likeBest BuyorWal-Mart. Banks play acritical role in the money supply,because they both hold deposits and make loans, which creates money. So, if you allow one of these really big banks to fail -- and the four big banks have anenormous amount of market share in the banking and deposit industry in theUnited States --if you allow one of them to fail, the contraction in the money supply would be so steep that it would almost certainly --and I am choosing that adjective purposely --it would almost certainly cause a depression. Not arecession, but a depression. So you have to ask yourself, do you swallow the unpalatable option of bailing out these dozens of bankers when theymake these mistakes in order to prevent aGreat Depression? Or,do you punish those dozens of bankers and thenpunish the rest of the entire country, and --because of the way the global economy is connected, the rest of the entire world --because of the mistakes that these guys have made?I personally don't think that you should do the latter. I think,you should punish those bankers to the extent that you can,swallow that unpalatable option, but save the economy from falling into a depression.

Lapera: Yeah. Exactly what you said. Andit's hard, because it's not what you want. Youwant there to be a consequence for bad actions. Butthe problem is, like you said earlier, if a Wal-Mart fails, it'sjust Wal-Mart. IfWal-Mart fails, the market corrects. When banks fail, the market doesn't correct fast enough. There'sno correction if the market is gone, which is, I think,something that people miss when they're like, "Ah, just let them fail." I mean, we do have those resolution plans, but that's if there's enough law and orderto make sure that the banks get broken up properly. This is a whole nothertopic of conversation.

So,let's talk a little bit about this:Dodd-Frank was made by people. There's room for improvement. People make mistakes. Thequestion is, what are wegoing to end up with, with the Trump administration? TheTrump administration laid out these seven principles that they want all financial regulation tofollow. Most of them, on the surface, seemtotally fine. We don't really knowwhat's going to happen. Obviously, John and I are not fortune tellers. We don't know what's going to happen in terms of future regulation. We don't know if Dodd-Frank is going to becompletely repealed andthey're going to pass new legislation. But, bothJohn and I are betting that,probably not. Dodd-Frank is probably not going to be repealed in itsentirety. Maybe parts of it, but not all of it, in all likelihood. AndI know that you have a theory about how they're going to push through change, John.

Maxfield:Therhetoric on the campaign trail was they're going to "dismantle" Dodd-Frank, or do a big number to it, orreduce regulations by 75% in the financial industry. And that all makes good sound bites, but unfortunately, those sound bites,at a certain point, run up against reality. The reality is, to get any type of huge overhaul of Dodd-Frank through Congress,it's going to have to go through the Senate,and in order for it to go through the Senate it's going to need to garner 60 votes,and the way the Senate is right now,it's just not going to get the 60 votes. So,there's just not going to be adramatic legislative overhaul to Dodd-Frank, at least, that doesn't look likeit's going to be the case right nowwith the way the Senate is. So,what they're going to do,if you listen to Gary Cohn, who was the former No. 2 atGoldman Sachs who is now Trump'stop economic advisor,he's saying they're going to affect regulation throughchanging personnel at the regulatory agencies, which will be aneffective way to do it. But it's just not going to be as visibleto the average citizen. It will be morevisible to those inside the banking industry.

Lapera:Andlisteners, if you follow this space closely, you might be saying, "What aboutHensarling'sFinancial Choice Act?" Thatmight go through. TheChoice Act, for listeners who are not as well versed in this space, isbasically the new answer to Dodd-Frank. They would take the Dodd-Frank framework and repeal what they want and put in new things,some of which are good and some of which are baddepending on who you ask. And that's the legislation we're talking about thatprobably won't get through the Senate, but who knows, it might.

Maxfield:Let me make one really fast point on the Hensarling Financial Choice Act. Ironically, the Financial Choice Act wouldeven further raise capital requirements on banks. It would decreasesome of thoseperipheralrequirements, regulations on them. But it would make things even worse for the banks, in terms of the core banking function. There'sa lot of moving pieces here.

Lapera: Definitely. Honestly, the Financial Choice Actcould be an entire nother show on its own. So, we're going to leave it at that for now.If you guys have any questions,definitely contact us at industryfocus@fool.com or by tweeting us @MFIndustryFocus. Basically, the way thatI would like to wrap up the show is saying overall the executive orderdoesn't actually do muchbesides requiring that reportfrom the Department of Treasury. It mightpossibly trigger the repeal of Dodd-Frankin favor of other regulation down the line,but we don't know yet. I know that you guys probably get sick of me and Johnsaying that over and over on this show,but we just don't know. If we did know,we would probably have different jobs.[laughs] Because then we could see the future. We'd be like Biff inBack to the Future.[laughs]

Maxfield:[laughs] Did he have a job?

Lapera: No,he was just a crazy mogul from winning all his bets. It'sa great trilogy, in case you haven't seen it. Austin, have you seen Back to the Future?

Austin Morgan: Yes, I have.

Lapera: Which one is your favorite?

Morgan: It'stough to say.

Lapera: Really? I'd say No. 3, for sure, for me.

Morgan: I enjoyed all of them.

Lapera: I just really like the Old West thing that was going on in No. 3.

Maxfield:It'sso hard to choose between masterpieces.

Lapera: That's true.[laughs] I will say that I also liked theleast favorite Indiana Jones movie, the Temple of Doom, the one with the heart beingripped out of the guy's chest, still beating.I was a very morbid child, apparently,but it's still one of my favorites. Anyway,[laughs]now that you guys know a little bit too much about me,let me read some disclosures here.

As usual, people on the program may haveinterests in the stocks that they talk about,and The Motley Foolmay have recommendations for or against,so don't buy or sell stocks based solely on what you hear. Thank you guysvery much for joining us. I hope everyone has a great week. Pleasedon't send me mean emailsabout this show.

Maxfield:No, do. Do send her mean emails, please.

Lapera: No! I mean,even if you sent me an email saying, "What are your political opinions?"I'm not going to answer it. I'm going to say, "I'msorry, I can't say anything,because The Motley Fool does not hold political stances," which is true. We cantalk about what is going onin politics, but I'm not going to tell you what I personally think. All right, well, that wraps it up for us. Thanks for joining us, John. Thank you, Austin. And everyonehave a great week!

Gaby Lapera has no position in any stocks mentioned. John Maxfield owns shares of Bank of America and Goldman Sachs. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.