Former Sen. Chris Dodd defended his signature financial services legislation on Thursday, drawing a sharp contrast with former Citigroup Chairman and CEO Sanford I. Weill, who a day earlier called for breaking up large Wall Street banks.
Dodd is one of the chief architects of the historic and controversial Dodd-Frank bill that sought to prevent a replay of the 2008 financial crisis. The retired senator staked out different territory from Weill, arguing that “it’s not just the size of an institution,” but the amount of risk carried on its books.
Dodd told CNBC’s “Squawk Box” that forcing all large banks to downsize was “too simplistic,” saying that Citi's former chief was wrong to call for an end to financial supermarkets. “Just breaking up the banks is not the solution,” Dodd said, even as he insisted the tools of Dodd-Frank could, in extreme circumstances, force a systemically risky institution to break up.
"The legislation allows for that Draconian step to be taken if necessary, not just with banks but with institutions that pose substantial risk to the country," Dodd said. "They have the power and authority under this legislation to actually do that."
The former Democratic senator from Connecticut is now the head of the Motion Picture Association of America, the top trade organization for Hollywood studios. Along with Massachusetts Democratic Rep. Barney Frank, Dodd authored legislation that sought to curb the excesses of financial institutions labeled “too big to fail.”
Many critics in Congress and Wall Street have complained about the law's burdensome requirements and complexity, and have called to have the legislation undone completely. But in his interview with CNBC, Dodd rejected calls to repeal the law, saying that critics should "give this a chance to see if it's doing its job."
Dodd's remarks came a day after a CNBC interview with Weill. The retired banking tycoon sparked a furor in markets by calling for an end to the financial supermarket concept he helped to pioneer.