Romney hits Dodd-Frank while calling Wall Street regulation 'essential'

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But he lambasted Dodd-Frank as being rife with unintended consequences, targeting in particular a provision that grants financial regulators the ability to identify what financial firms are vital to the financial system and merit heightened oversight.

Romney argued the provision effectively codifies "too big to fail" by labeling what banks the government believes could not fail without threatening the financial system, which in turn should hand them a competitive edge thanks to an implicit government backstop.

"This is the biggest kiss given to New York banks I've ever seen," he said. "I wouldn't designate five banks as too big to fail and give them a blank check. That's one of the unintended consequences of Dodd-Frank that wasn't thought through properly."

Obama's rebuttal keyed in on Romney's vow to "repeal and replace" Dodd-Frank as the recipe for returning the nation to the conditions that led to the financial meltdown of 2008. Romney has vowed on the campaign trail to repeal Dodd-Frank and replace it with "sensible regulations," but has yet to delve into specifics.

"Does anyone out there think that the big problem we had is that there was too much oversight and regulation of Wall Street? Because if you do, Gov. Romney is your candidate," he said.

He blasted banks for "making money hand over first, churning out products the banks themselves didn't understand," while touting Dodd-Frank as yielding the "toughest reforms on Wall Street since the 1930s."

Romney went on to argue Dodd-Frank's new regulations were slowing the economic recovery, as banks sit by the sidelines waiting for regulations to be drafted. To highlight his point, Romney focused on Dodd-Frank rules that would make banks liable for selling anything other than "qualified mortgages." So far, rules have yet to be finalized detailing that provision.

"It's been two years! We don't know what a qualified mortgage is yet, so banks are reluctant to give loans," he said. "Dodd-Frank didn't anticipate putting in place the kinds of regulations you need to have."

The qualified mortgage provision is set to take effect Jan. 21, and the Consumer Financial Protection Bureau is working to write rules implementing the provision before then.