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Mitt Romney's 'Repeal and Replace' Dodd-Frank Plan Leaves Major Gaps

Mitt Romney sharply criticized the Dodd-Frank financial regulatory overhaul in Wednesday night's presidential debate, but he gave little indication of what financial restrictions and oversights he would maintain should he win in November.

The Republican presidential nominee repeated his promise to "repeal and replace" the 2010 financial regulatory law, saying that the measure passed in the wake of the 2008 financial industry crisis is harming small banks and is constricting mortgage lending.

Echoing a common complaint from GOP lawmakers, Romney targeted the law's provision directing federal regulators to designate certain financial institutions as systemically important, which he said gave them permanent protected status as "too big to fail."

"They're effectively guaranteed by the federal government," Romney said. "This is the biggest kiss that's been given to New York banks I've ever seen. This is an enormous boon for them."

In fact, Wall Street strongly disagrees with that characterization, saying Dodd-Frank also gives it enhanced supervision from the Federal Reserve, as well as higher capital standards and liquidity requirements, which it opposes. The law also requires the biggest banks to craft "living wills," or detailed plans the Federal Deposit Insurance Corp. could execute so that failing firms are liquidated in an orderly manner rather than bailed out as they were at the height of the 2008 financial crisis.

Romney also went after the law's housing components, blasting the administration for having yet to issue the "qualified mortgage" rule, which will require lenders to verify that consumers are able to repay their loans before extending credit. The rule is expected to fundamentally reshape the future of the mortgage market by setting new lending standards, and the housing industry is eager to see how the rule will end up.

"It's been two years. We don't know what a qualified mortgage is yet. So banks are reluctant to make loans, mortgages," Romney said. "It's hurt the housing market."

The housing sector remains fragile, but most analysts believe it is slowly improving and that a recovery has picked up speed this year, with home prices rising across the country as mortgage rates have hit record lows. And although the Consumer Financial Protection Bureau, which is tasked with writing the qualified mortgage rule, has deliberated slowly, the bureau has not missed its statutory deadline of January 2013 to finalize the rule.

Despite his criticism of certain Dodd-Frank provisions, Romney did not say which parts he would try to keep if he became president.

"We're not going to get rid of all regulation," Romney said. "You have to have regulation. And there are some parts of Dodd-Frank that make all the sense in the world." He mentioned a need for transparency and leverage limits for financial institutions.

Even with a GOP-controlled Congress, Romney as president would have difficulty fully repealing the Dodd-Frank law; a more likely scenario would be a piecemeal legislative assault with some elements remaining.

In the debate, President Barack Obama questioned whether Romney was changing his position on the law.

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