The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin and Jonathan Guilford

WASHINGTON, May 20 (Reuters Breakingviews) - Financial regulation follows its own cycle, with laissez-faire periods succeeding stricter ones as memories of past catastrophes fade. Just look at President Donald Trump’s administration hacking away at the banking rulebook. Yet, remarkably, much of the legislative and regulatory settlement that followed the 2008 financial crisis endures. Barney Frank, who co-authored this response as part of the landmark 2010 law bearing his name, died Wednesday, after a trailblazing career. While pieces of his most famous accomplishment may be cut back, his legacy will linger on Wall Street.

Frank, a longtime Democratic congressman from the Boston suburbs, was known as a liberal leader and the first voluntarily open gay member of the House of Representatives. Chairman of the House Financial Services Committee when Democrats took over Congress in 2007, he and Senate counterpart Chris Dodd took charge of picking up the pieces after the biggest banking catastrophe since the Great Depression.

Despite howls over its reach, the Dodd-Frank Act extracted its due for a historic series of bailouts. It beefed up federal regulators’ ability to press for larger loss-absorbing capital buffers, codified annual stress tests that kept the pressure on Wall Street, and banned risky proprietary bets from banks’ balance sheets.

Tying banks’ hands also cleared the path for a new class of rival. The likes of Blackstone BX.N and Apollo Global Management APO.N muscled into the business of lending to buyouts, for instance. There is plenty to worry about in the $3.5 trillion private credit industry, where heavy leverage and the byzantine wizardry of securitization is alive and well. It is, however, separated from institutions holding average Americans’ deposits.

That alone represents a seismic shift. But the law did plenty more, like transforming derivatives trading, joining up disparate regulators to police novel financial instruments, and creating the Consumer Financial Protection Bureau, which set regulations on products like payday loans and prepaid credit cards. The Trump administration has essentially closed the CFPB; most of its employees have been fired and its regulations are essentially unenforced.

There have been other rollbacks. A body intended to monitor systemic risks lies mostly dormant. In 2018, Congress exempted smaller banks from various rules, which the Federal Reserve would later point to as contributing to the failure of mid-sized Silicon Valley Bank.

Frank, ever contradictory, supported that rollback, which exempted institutions like Signature Bank, where he served on the board. Regulators seized the lender during the 2023 crisis unleashed by SVB. Frank claimed this was motivated by making “an example” of the cryptocurrency industry served by Signature. It was an odd capstone to a career defined by pushing back on financial risk.

The real test for Dodd-Frank’s legacy will be when the next crisis equal to 2008 or 1929 rolls around. That will test whether bailouts have been banished, or too-big-to-fail institutions simply entrenched. No matter the outcome, it will bear Barney Frank’s imprint.

Follow Gabriel Rubin on Bluesky and LinkedIn and Jonathan Guilford on X and LinkedIn.

CONTEXT NEWS

Barney Frank, the former chairman of the House Financial Services Committee who co-wrote the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, died on May 20.