By Amy Leisinger, J.D.
Financial Services Committee Chairman Jeb Hensarling (R-Tex) recently spoke about the committee’s plan to offer reforms to the Dodd-Frank Act. With the Act’s breadth of regulatory changes and creation of new federal authorities, he stated, American society has become less prosperous and further removed from overall market freedom. In the coming weeks, the chairman noted, the FSC will put forward legislation to restore economic growth while protecting consumers and retaining economic liberty. Regulatory micromanagement is not a substitute for market discipline, and simplicity of regulation is key, he explained.
“I will not rest—and my Republican colleagues on the House Financial Services Committee will not rest—until we toss Dodd-Frank onto the trash heap of history,” Hensarling stressed.
Dodd-Frank rollback. In his remarks, Hensarling lamented the volume and complexity of the regulations resulting from the Dodd-Frank Act and noted that deregulation was not the root cause of the financial crisis. Dodd-Frank supporters said the legislation would promote financial stability and end too big to fail, he said, but this has not happened. Arguably, he noted, Dodd-Frank codified “too big to fail” and taxpayer funded bailouts with SIFI designation and the creation of the Orderly Liquidation Authority.
Further, Hensarling stated, Dodd-Frank led to a rise in unbanked or underbanked households and curtailed credit availability. Citizens have not only lost economic freedom, but also constitutionally protected freedoms with respect to Dodd-Frank’s creation of the Consumer Financial Protection Bureau (CFPB) and Financial Stability Oversight Council, whose members are not elected but yet yield substantial power, according to Hensarling. On top of this, Hensarling noted, Dodd-Frank has resulted in unstarted small businesses, unproduced innovative products, and unrealized economic security.
Proposed changes. The chairman noted that FSC Republicans will offer a “vision” of banking and capital markets to effectively repeal and replace Dodd-Frank. Growth must be restored through competitive and transparent capital markets, and everyone must have the chance to become financially independent, he explained. Systemic risk should be reduced through market discipline while ensuring that Americans are protected from fraud and deceptive practices, Hensarling stated, and taxpayer bailouts of financial institutions must end.
Under the new plan, he explained, if financial institutions choose to meet high but simple capital requirements, they will find substantial relief from both Dodd-Frank and Basel’s burdensome obligations. The reform legislation will also include limitations on Federal Reserve overreach and put the CFPB on budget and create a bipartisan commission with appropriate rulemaking authority, according to the chairman.
“Help is on the way,” Hensarling assured.