In broad brush, the premise of the incoming Donald Trump administration is that the Dodd-Frank law, the landmark financial regulatory overhaul of 2010, squeezed U.S. economic growth.

In a narrow sense, it’s the simple argument that it’s harder to get a loan now than it was 10 years ago. But that contention is harder to prove than the sometimes-glib assertions about the role of regulation in cutting back on lending.

“The number one problem with Dodd-Frank is that it’s way too complicated and cuts back lending,” Steve Mnuchin, the former Goldman Sachs banker whom Trump plans to nominate as Treasury Secretary, told CNBC. “So we want to strip back parts of Dodd-Frank and that will be the number one priority on the regulatory side.”

Americans borrow money in all sorts of ways. Individuals get mortgages from brokers and banks, and most of them are effectively backed by the U.S. government. Companies sell short-term obligations on financial markets in order to stock shelves or meet other immediate spending needs. And banks loan money to small- and medium-sized businesses.

In all those areas, lending has sometimes declined since 2010, but pinning it on Dodd-Frank is a harder call. The bloated, crisis-addled mortgage market was ripe for a downsizing, and companies have been able to issue other kinds of securities — longer-term bonds, notably — to meet their obligations.


Credit Tracks Economy

More recently, evidence has emerged to suggest that credit growth may simply be tracking the slogging, frustratingly slow economic recovery after the worst financial crisis since the Great Depression.

The Federal Deposit Insurance Corporation reported in November that lending by banks reached an all-time high of $9 trillion in the third quarter. Put another way, after years of tepid growth, companies and their bankers see opportunities that simply were not there in previous years.

“Small business loan growth was particularly strong at community banks, which reflects a broad-based improvement in economic conditions in many communities across the country,” James Chessen, chief economist at the American Bankers Association, said.

That said, the situation has room for improvement.

The Cleveland Federal Reserve Bank, in its annual survey of small business credit conditions for 2015, found that half of firms applying for loans reported financing shortfalls between the third quarter of 2014 and the same period in 2015, meaning they were approved for less than the amount requested.


Share Buybacks Multiply

Another tip-off that credit is plentiful lies in the statistics on share buybacks, a common means for companies to return capital to shareholders in the form of a higher stock price.

Companies in the S&P 500 index will spend roughly $780 billion on share repurchases in 2017 — a 30 percent increase over 2016, Goldman Sachs predicted in a recent report. Its analysts, led by David Kostin, also said that companies would use money they bring in from overseas under tax reform legislation being discussed by Trump and congressional Republicans, perhaps $200 billion, would be used for buybacks.

“The fact that there is so much credit out there going to buybacks tells you that the problem is not access to credit,” said Andy Green, managing director for economic policy at the Center for American Progress, a think tank with close ties to Democrats.  “It’s been demand.”

One challenge in assessing Mnuchin’s claim involves how flexible we believe American capital markets are, and whether they adapt to regulatory changes that help make the system as a whole more resilient in times of crisis.

Dodd-Frank-related rules took effect this year that require money market mutual funds, the multi-trillion-dollar behemoths that invest in corporate securities, to assess their overall value on a rolling basis. The regulation stems from the panic that developed in 2008 when investors feared they might not be able to cash in their shares in the funds, leading one major fund to “break the buck” — to redeem shares at below $1 each.


Commercial Paper Market

To secure returns, those money market funds invest heavily in commercial paper, a form of corporate security that firms can issue on very short notice to cover urgent funding needs, like accumulating inventory for an unexpected rush.

“For decades, the U.S. commercial paper market has been the most efficient, cost-effective short-term financial market utilized by corporate treasurers to meet their day-to-day funding requirements,” said Thomas Dean, chairman of the National Association of Corporate Treasurers.

The new regulations have led money market funds to stash more money in gilt-edged government securities, and less in commercial paper, Dean pointed out. About $1 trillion flowed out of top-rated funds in the year before the new rule took effect in October, and much of that cash would have bought commercial paper.

However, precisely because American capital markets are diverse, it’s hard to say that any corporate treasurer couldn’t raise money, notes Mike Konzcal, a fellow with the Roosevelt Institute, a group supportive of Dodd-Frank.

“The corporate governance literature gives us a hierarchy of substitutable funding options for businesses looking to expand, usually a range from retained earnings to borrowing to issuing equity,” Konzcal said.


Mortgage Credit Lower

Indeed, corporate bond issuance hit $1.3 trillion in the first three quarters of 2016, according to the Securities Industry and Financial Market Association.

The case for tighter credit after Dodd-Frank is probably strongest in the area of mortgages, a sector in which it is very hard to get a loan without very good credit scores. The days of subprime mortgages are long gone.

That’s not the case for other kinds of subprime credit, which suggest something is up when it comes to mortgages. The subprime auto lending market, for example, exploded in the years after the financial crisis. Only in the last year, according to credit bureau Experian, has the share of new and used auto loans and leases given to subprime customers started to drop.

Since home loans lay at the heart of the 2008 financial crisis, they’ve undergone the most thorough regulatory revamp of any financial product.

New rules issued by the Consumer Financial Protection Bureau mandated underwriting standards so as to eliminate the shoddy mortgages that created the crisis. Another set of regulations governs mortgage servicers, the firms who collect payments and handle foreclosures. Securities regulators also forced mortgage-backed bond issuers to retain a portion of what they securitize, to increase the incentive to create quality loans in the first place.

Fannie Mae and Freddie Mac, the two companies that buy and securitize most home loans in the United States currently, remain under government control. Their rules on mortgages affect each and every one of those loans.


Missing Mortgages

The Urban Institute, a research group, calculated how many mortgages would have been made in 2015 if lenders had used the underwriting standards of 2001 — years before the massive housing bubble inflated — 1.1 million more borrowers would have obtained home loans last year. For the years 2009-2014, the number is a staggering 5.2 million.

“Since the 2008 housing crisis, borrowers with less than stellar credit have found it hard to obtain a mortgage,” the institute wrote in a recent research paper.

The Urban Institute didn’t pin down any one rule in Dodd-Frank that accounts for the change. It cited rules, imposed by Fannie and Freddie under control of the Federal Housing Finance Agency, that require lenders who sell off mortgages to repurchase them if the loans go bad. The cost of servicing delinquent loans and potential litigation from bad underwriting are two other reasons, the institute said.