Mark Calabria
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After two years of the Dodd-Frank Wall Street Reform and Consumer Protection Act, a few of the landmines hidden in its hundreds of pages are starting to come to the surface.

Under Section 1071, Subtitle G, labeled "Regulatory Improvements" (who says Congress doesn't have a sense of humor?), the act establishes a system of small business loan data collection. The claimed purpose is to "facilitate enforcement of fair lending laws and enable communities, governmental entities and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small business." Translation: Push affirmative action in small-business lending.

Recall that the same scheme of statutory social engineering contributed to the boom in subprime lending that eventually imploded the mortgage market. It appears Dodd-Frank is determined to drive small business lending down the same path.

Mark A. Calabria is director of financial regulation studies at the Cato Institute.

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The financial crisis demonstrated the government's ability to take what should be a relatively safe activity — mortgage lending — and turn it into a disaster. Small-business lending, however, is already far from safe. The annual failure rate for firms with fewer than five employees averages around 20 percent — 1 in 5. That's true even in the best of times: In 2005, 19 percent of small businesses failed. Small-business failures, however, are not random. Younger firms fail at a higher rate, of course. Another big factor is the type of firm — a factor that tends to be heavily influenced by the race and gender of its ownership.

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Mark Calabria

Mark A. Calabria, is director of financial regulation studies at the Cato Institute.