Posted by Staff on October 30, 2015
House Passes Bill to Protect Low and Middle-Income Savers

The House of Representatives passed H.R. 1090, the Retail Investor Protection Act sponsored by Rep. Ann Wagner (R-MO), on Tuesday by a bipartisan vote of 245-186. This bill was designed to put a stop to the Department of Labor's (DOL) proposed fiduciary rule that would make professional retirement investment advice for low and middle-income Americans inaccessible and unaffordable.

There is a strong bipartisan agreement that the DOL's misguided fiduciary rule would make it more difficult for hard-working Americans to save for their retirements and obtain their portion of the American Dream.

“The fiduciary rule will take away investment advice from hundreds of thousands, if not millions, of low and moderate income people all around the nation who rely upon this advice to save for retirement,” remarked Chairman Jeb Hensarling (R-TX) on the House floor.

Rep. Wagner said, “My constituents are tired of Washington bureaucrats telling them what food their families should eat, where they should turn for health care and, now, how they should save for retirement. I for one refuse to stand by and let this Administration advance another regulation that ultimately takes away our freedoms. The burdensome 1,000 page rule offered by the Department of Labor would do just that, increasing costs for Missouri families and reducing access to sound financial advice. I was proud to lead in this bipartisan fight to protect investors and I am hopeful that the U.S. Senate will join us in our efforts to block this onerous rule.”

House Passes State Licensing Efficiency Bill

The House of Representatives passed by voice vote H.R. 2643, the State Licensing Efficiency Act of 2015, sponsored by Rep. Roger Williams (R-TX). The bill will expand the ability of states to use a federally accepted registry, the Nationwide Multistate Licensing System, to expedite background checks for licensing purposes. The bill passed the committee by a unanimous vote of 57-0 on July 29.

“This bill is part of my larger goal in letting the states pick up where the federal government falls short,” said Rep. Williams when he introduced the bill. “The current background check process is inefficient, but this registry has a proven track record of being effective while also reducing regulatory burden.”


Rep. Ann Wagner | House passes bill to halt DOL’s fiduciary rule

“Unfortunately, this rule-making from the Department of Labor could potentially cut access, limit choice and raise costs for that kind of financial advice, putting the goal of retirement even further out of reach,” Wagner said.

Weekend Must Reads

Wall Street Journal | Much Ado About the Fed’s Nothing

Chair Janet Yellen and other members keep saying that it will soon be time to move, but each time as the date approaches they find another reason not to move. Perhaps they’re afraid of taking responsibility for the consequences of raising rates if the economy turns south. At least if they stay at zero the Fed won’t be blamed for having done nothing. If column inches are a guide, all of this uncertainty is good for journalism, if not for the economy.

Forbes | Progressive Economics: The Rise Of Bureaucracy In America

Bureaucracy is suffocating America; yet, the bureaucrats themselves are doing quite well. It seems that the more they asphyxiate our economy, the more prosperous the bureaucratic class becomes.

Wall Street Journal | The Fed Has Hurt Business Investment

For real assets, the benefits of QE are far less obvious—and the results far less impressive. Weak economic data and mixed messages from the Fed in recent months only heighten our concerns about the trajectory of the economy and the sustainability of U.S. financial-asset prices.

Bloomberg View | The SEC's Kangaroo Courts

Some have likened the SEC's quasi-judicial system to a kangaroo court. Even if it isn't, it has the potential to become one. It should be restrained before it does too much damage.

  On the Horizon 

November 3, 2015 10:00 a.m.
Full Committee Markup

November 4, 2015 10:00 a.m.
Full Committee Hearing

"Semi-Annual Testimony on the Federal Reserve’s Supervision and Regulation of the Financial System

  In the News

Wall Street Journal | U.S. Government Uses Race Test for $80 Million in Payments

The Hill | Yellen to discuss Fed's Wall Street oversight before House panel

Politico Pro | Yellen to testify before Financial Services Committee Nov. 4

Reuters | Fed's Yellen to appear before congressional committee Nov. 4

Bloomberg | House Passes Bill to Halt DOL Fiduciary Rule Proposal

Washington Free Beacon | 1,925 Days After Position Created to Conduct Oversight of the Fed, Obama Has Yet to Appoint Someone

Detroit News | Obama Rules Deny Small Investors Advice

Bloomberg | Yellen to Testify Nov. 4 on Bank Regulation Before House Panel

Bloomberg | House Set to Vote on Fannie-Freddie Executive Pay Cap

American Banker | Yellen to Testify on Fed Regulatory Activities

Posted by Staff on October 23, 2015
HUD at 50

The Financial Services Committee held a hearing Thursday to review the role and impact the Department of Housing and Urban Development (HUD) has had on federal housing policy in the 50 years since its creation.

Chairman Jeb Hensarling (R-TX) said, "Our collective goal cannot be limited to helping people tolerate poverty, it must be to help them escape poverty. Whether I’ve met them at the Salvation Army Women’s Shelter, Habitat for Humanity homes or the Jubilee Center in my native Dallas, I know that is the aspiration of our low income brothers and sisters. We must help them find ways for them to provide for their families, to conquer generational cycles of dependency, and to have the opportunity to enjoy the dignity of meaningful work."

Republican Members emphasized the value and dignity of work as a path to self-sufficiency and the need for HUD programs to help people escape the cycle of poverty rather than become stuck in it.

Housing and Insurance Subcommittee Chairman Blaine Luetkemeyer (R-MO) said, “HUD’s programs and policies are in need of an overhaul and should turn its focus on reducing red tape instead of creating it. I thank Chairman Hensarling for his commitment to exploring this serious subject so that we can improve opportunity for and accessibility of affordable housing across the nation.”

Legislative Proposals to Promote Main Street Job Growth

The Financial Institutions and Consumer Credit Subcommittee held a hearing on Wednesday to review legislative proposals designed to help Main Street businesses focus their time and resources toward creating jobs and growing their businesses rather than trying to comply to unnecessary and overly burdensome rules. Small businesses and community financial institutions are being buried under Dodd-Frank Act regulations and other bureaucratic mandates.

Subcommittee Chairman Randy Neugebauer (R-TX) noted, "Throughout this Congress, we have seen examples and heard testimony about how regulatory impediments prohibit job creation, cause consolidation of community financial institutions, and decrease choices for consumers."

The bills that the subcommittee reviewed are:
  • H.R. 2121, the “SAFE Transitional Licensing Act of 2015,” sponsored by Rep. Steve Stivers
  • H.R. 2209, to require the appropriate Federal banking agencies to treat certain municipal obligations as level 2A liquid assets, and for other purposes, sponsored by Rep. Luke Messer
  • H.R. 2287, the “National Credit Union Administration Budget Transparency Act,” sponsored by Rep. Mick Mulvaney
  • H.R. 2473, the “Preserving Capital Access and Mortgage Liquidity Act of 2015,” sponsored by Rep. William Lacey Clay
  • H.R. 2896, the “TAILOR Act,” sponsored by Rep. Scott Tipton
  • H.R. 2987, the “Community Bank Capital Clarification Act,” sponsored by Rep. Gregory Meeks
  • H.R. 3340, the “Financial Stability Oversight Council Reform Act,” sponsored by Rep. Tom Emmer
Federal Housing Reforms in the 21st Century

The Housing and Insurance Subcommittee held a hearing on Wednesday to examine how HUD and the Rural Housing Service can better serve the housing needs of low-income individuals and families.

Much of the hearing focused on H.R. 3700, the “Housing Opportunity Through Modernization Act,” introduced by Subcommittee Chairman Blaine Luetkemeyer (R-MO).

“This week’s subcommittee hearing provided a great opportunity for both members on the subcommittee and leaders in housing advocacy and industry to express their priorities in housing reform,” he said, noting that witnesses appearing at the hearing all share “the desire to see changes in federal programs so they can more easily serve families in need.”

H.R. 3700, the Housing Opportunity Through Modernization Act, modernizes and streamlines HUD and Rural Housing Service programs to more effectively serve individuals in need of housing assistance. Members continuously expressed bipartisan support for this bill and its objective to responsibly provide housing assistance for low-income communities and the homeless.

Oversight of the SEC’s Division of Investment Management

The Capital Markets and Government Sponsored Enterprises Subcommittee held a Friday oversight hearing of the Securities and Exchange Commission's (SEC) Division of Investment Management.

Committee Members called for the SEC to use its time and resources more wisely toward its statutory mission, with a specific emphasis on capital formation so small businesses can access the financing they need.

Subcommittee Chairman Scott Garrett (R-NJ) remarked, "As part of our oversight responsibility, this Subcommittee will be closely monitoring the SEC’s actions in this area to ensure that they actually reflect the SEC’s three-fold mission, and are not simply ad hoc responses to threats from other regulatory bodies."


Rep. Robert Pittenger | Pittenger: 'We're a lion with no teeth'

Rep. Robert Pittenger, R-N.C., is vice chairman of the House Financial Services Committee's Task Force on Terrorism Financing, which has been investigating ways of improving U.S. efforts to choke off the flow of money to international terrorist groups.

Weekend Must Reads

American Action Forum | When Regulatory Costs Trump Benefits

Typically, whenever an agency issues a major rule, they tout how the benefits greatly exceed the costs. However, agencies are far more reticent about promoting regulations that actually do more harm to the economy than good.

AEI | Is Dodd-Frank’s Orderly Liquidation Authority Necessary to Fix Too Big to Fail?

The Dodd-Frank Act (DFA) Orderly Liquidation Authority has many legal issues that could prevent its use. Should there be a next financial crisis, regulators may again be forced to sell a large failing bank to a larger banking institution, creating yet another too-big-to-fail institution.

    On the Horizon 

Stay Tuned!

  In the News

Wall Street Journal | Lawmakers Raise Alarms Over Tapping Banks to Pay for Highways

The Hill | Lawmakers want to keep Fed dividend rate at 6 percent

American Banker | The Choking Continues After 'Choke Point'

American Banker | House Lawmakers Push Back on Fed Dividend Cut

Wall Street Journal | SEC Faces New Attack on In-House Judges

CU Insight | House committee looks at CUNA-backed regulatory relief bills today

Bloomberg | Bill Would Allow SEC Defendants to Use Federal Court

Bloomberg | Bill Would Create Small Business Advocate at SEC

Posted by Staff on October 22, 2015

One of the witnesses at today’s committee hearing on the Future of Housing in America is Renee Glover, who has been actively involved in affordable housing for more than 30 years from several different vantage points:  the private sector, the public sector and the international non-government sector.  From nearly 20 years, she was CEO of the Atlanta Housing Authority.

In 1994, when Glover took over at the Atlanta Housing Authority (AHA), the organization was considered corrupt and ineffective. Atlanta was suffering from a major public housing crisis with the highest percentages of residents in public housing in the US and rampant crime and despair.

Things were so bleak for Atlanta’s public housing projects, some of which dated back the 1930s, that Governing Magazine referred to them as their “own dismal universe of poverty and crime — walled off psychologically and sometimes physically from the rest of the city.

Glover changed all that. In preparation for the 1996 Olympic Games, AHA established an innovative, long-term blueprint for a coordinated approach to its housing challenges. The plan was based on a new model of developing mixed-income, mixed-finance housing. AHA began demolishing its old public housing projects in 1995 and, by the end of Glover’s tenure, had torn down almost 15,000 units spread over 32 dilapidated projects. In their place, AHA constructed modern townhouse developments where lower-income residents would share their neighborhoods with middle-income residents. To fund this transformation, Glover leveraged AHA’s limited federal funds into private investment dollars to revitalize struggling neighborhoods. This approach to public-private coordination also allowed AHA to decrease its payroll from 1,400 people to 380 in her first 13 years.

As a result of her efforts, Glover successfully converted AHA from being a HUD-labeled “Troubled” housing authority in 1994 to a “High Performer” in 1999, a status it still maintains today.


1990 – HUD places the Atlanta Housing Authority (AHA) on its list of “Troubled” housing authorities based on its inability to maintain housing quality, collect rents, occupy vacant units, and provide a safe environment for its 16,500 inhabitants.

1994 – Glover appointed as AHA’s president and CEO; AHA’s then-score on HUD’s annual management assessment program used to evaluate all public housing agencies: only 36 out of 100.

1995 – AHA adopts a new multi-year strategic plan to transform the delivery of affordable housing by deconcentrating poverty. It begins tearing down outdated housing projects and replacing those units with privately managed mixed-income developments.

1998 – HUD removes AHA from its “Troubled” housing authorities list.

1999 – AHA scores 100 out of 100 on HUD’s annual management assessment program, earning its “High Performing Agency” designation.

2003 – AHA awarded “Moving to Work” (MTW) status by HUD, granting it more local flexibility to innovate in its use of federal funds by exempting it from layers of Washington red tape. According to HUD, MTW authorities “are expected to use the opportunities presented by MTW to inform HUD about ways to better address local community needs.”

2005 – To promote greater self-sufficiency, AHA uses its MTW flexibility to institute a work requirement that able-bodied residents must maintain continuous full‐time employment or participate in a combination of school, job‐training and/or part‐time employment for a minimum of 30 hours per week.

2011 – AHA demolishes the last of its public housing projects, the Palmer House high-rise, ending a failed eight decades long experiment. Atlanta had been the home to the nation's first public housing community, Techwood Homes, built in 1936.

2015 – According to the Federal Reserve Bank of Atlanta, as of today the Atlanta Housing Authority has “sponsored 16 master-planned, mixed-use, mixed-income communities, in partnership with private sector real estate developers and other investors, leveraging $300 million of federal funds into over $3 billion of private investment and economic impact.

Posted by Staff on October 09, 2015
House Passes Bipartisan Consumer Protection and Regulatory Relief Bills

The House passed five bipartisan Financial Services bills this week, including one that provides a formal hold-harmless period for those making a good faith effort to comply with the CFPB’s 1,888-page TRID rule, which became effective on Oct. 3.

The bill, H.R. 3192, the Homebuyers Assistance Act sponsored by Rep. French Hill (R-AR), passed overwhelmingly by a vote of 303-121.

“I am happy members of both sides of the aisle were able to come together and move legislation that will prevent costly market disruptions and delays for Americans homebuyers,” said Rep. Hill.

Four other bipartisan bills that passed the House this week provide needed regulatory relief for Main Street job creators and investors, and help state and local agencies aid families in collecting child support payments. Americans working in the financial sector to have the freedom to use their time and resources toward creating jobs and growing the economy rather than complying by misguided rules. The following are the financial services bills that passed with bipartisan support:

• H.R. 1553, the Small Bank Exam Cycle Reform Act, sponsored by Rep. Scott Tipton (R-CO)

• H.R. 1839, the Reforming Access for Investments in Startup Enterprises Act (RAISE) Act, sponsored by Rep. Patrick McHenry (R-NC)

• H.R. 2091, the Child Support Assistance Act, sponsored by Rep. Bruce Poliquin (R-ME)

• H.R. 1525, the Disclosure Modernization and Simplification Act, sponsored by Rep. Scott Garrett (R-NJ)

Subcommittee Recommends MDBs Focus on Economic Growth

The Monetary Policy and Trade Subcommittee held a hearing on Friday to discuss the future of multilateral development banks (MDBs) and how they can more effectively spur economic growth to alleviate poverty in developing countries.

“Congress plays an important role in determining U.S. funding for the MDBs and engaging in oversight of the Administration’s participation in the MDBs," remarked Subcommittee Chairman Bill Huizenga (R-MI). "The MDBs’ goal is to draw on member nations’ contributions to leverage additional private sector financing."


Rep. French Hill | House OKs Hill's bill to delay bank rebuke

Rep. French Hill, R-Ark., who sponsored the bill, said businesses are concerned that the agency won't be lenient, despite a written promise from the bureau's director. An act of Congress, he said, would give the institutions greater confidence.

Rep. Scott Tipton| House OKs Tipton’s bank relief bill

The House unanimously passed legislation on Tuesday sponsored by Rep. Scott Tipton that would ease regulatory burdens on well-managed community banks.

Weekend Must Reads

Investor's Business Daily | Sorry, Bernanke, But Fed’s ‘Recovery’ Was Miserable

This “recovery” has been by far the worst – even by the Fed’s own data. Put simply, Fed policies since the financial crisis not only haven’t helped the economy rebound, they’ve also held it back.

Powerline | Why the Big Banks Love the Democrats

Democrats are corporatists who want to favor a few big firms that the government can then control. Dodd-Frank has been a disaster, but not for the nation’s biggest banks and not for the Democratic Party.

    In the News

Bloomberg | House Passes Bill Easing Exams on Small Banks

Washington Examiner | GOP seeks to rein in Obama's finance bureau

American Banker | House Passes Bill to Delay Enforcement of New Mortgage Disclosures

HousingWire| House passes bipartisan TRID grace period bill 303-121

The Hill | Dem economists attack Elizabeth Warren over Brookings firing

Washington Examiner | Jobs Report: Disappointment Is Routine With This Administration

Investor's Business Daily | Jobs Report: Disappointment Is Routine With This Administration

Wall Street Journal | Top Republican Urges Yellen to Comply with Congressional Subpoena

Posted by Staff on October 02, 2015

CFPB, Dodd-Frank Harms Consumers

On Tuesday, CFPB Director Richard Cordray faced intense questioning – from committee members of both parties – particularly about the unaccountable Bureau’s efforts to unfairly pursue auto lenders and dealers, even though the Dodd-Frank Act expressly exempts dealers from the CFPB’s jurisdiction.

As Investor’s Business Daily noted in its coverage of the hearing, “Cordray confessed under grilling by House banking panel chief Jeb Hensarling that the disparate impact methodology that his agency uses…’overestimates’ racial disparities on loan pricing.”

“In short, Cordray is trying to restructure the $900 billion auto finance industry based on bad math,” said the newspaper’s editorial.

The CFPB’s disparate impact methodology was described as “downright insulting to African-Americans” by Rep. David Scott (D-GA), “for assuming last names such as Johnson, Williams or Robinson belong to black borrowers,” the Wall Street Journal reported in its article about Tuesday’s hearing.

The Bureau, a creature of Dodd-Frank, is uniquely unaccountable to hardworking taxpayers because it is not subject to the usual checks and balances that protect Americans from government overreach and abuse.

“Instead of the equal protection offered by the impartial rule of law, they are today dictated to by the arbitrary rule of regulators, and Exhibit Number One is the CFPB director,” said Chairman Hensarling (R-TX).

“Dodd-Frank and the CFPB are the prime reason the big banks are bigger and the small banks are now fewer.  This has eliminated competition, stifled innovation and given consumers fewer choices.  Dodd-Frank and the CFPB have raised prices, eliminated free checking for millions, and are cutting off access to mortgages, bank accounts and credit cards.  This tragically makes it harder for low income Americans living paycheck to paycheck to improve their lives and achieve financial independence,” Hensarling added.

Committee Approves Bipartisan Bills to Empower Consumers and Job Creators

On Wednesday, the full committee approved several bipartisan bills designed to protect consumers and help build a healthier economy.

One of the bipartisan bills approved by the committee, H.R. 1090, the Retail Investor Protection Act sponsored by Rep. Ann Wagner (R-MO), will protect Americans’ ability to choose and access investment advice.

“I'm grateful for my colleagues on the Financial Services Committee who joined me today in protecting the millions of low- and middle-income Americans from the Administration's latest power grab. Preserving access to sound investment advice for hardworking families is something I believe in and will continue to fight for, and I look forward to seeing this bipartisan bill on the House floor soon," said Rep. Wagner.

The committee also approved two bipartisan bills that will bring more accountability and transparency to the CFPB. The CFPB is perhaps the most powerful and least accountable federal agency in history – a dangerous defect that stems from how the Bureau was designed in the Dodd-Frank Act.

H.R. 957 ensures greater accountability at the CFPB by creating an independent Inspector General for the Bureau.

“The CFPB has been given broad authority and must be accountable to the American people. More than 30 other federal departments and agencies have an independent Inspector General. This bill would bring the CFPB in line with these agencies and provide the necessary oversight and transparency,” said bill sponsor Rep. Steve Stivers (R-OH).

H.R. 1266, the Financial Product Safety Commission, removes the CFPB from within the Federal Reserve System and re-establishes it as a stand-alone agency that is governed by a five-member, bipartisan commission.  All authorities and powers of the CFPB remain unchanged.

 “After months of productive conversations with my colleagues from both sides of the aisle, I’m pleased the Committee acted in a bipartisan manner to move this CFPB commission bill forward. By changing the leadership structure, we can ensure the Bureau is more accountable, transparent and shielded from the whims of political change and partisan politics,” said bill sponsor Rep. Randy Neugebauer (R-TX).

The committee approved the Burdensome Data Collection Relief Act, H.R. 414 sponsored by Rep. Bill Huizenga (R-MI).  The bill repeals a burdensome, unneeded and expensive pay ratio requirement of Dodd-Frank.

“We are all concerned about creating more jobs in our various congressional districts.  And instead of companies being forced to spend millions of dollars trying to comply with a regulatory mandate for which the SEC was unable to quantify any benefits to shareholders, shouldn’t these burdensome costs be used by manufacturers, retailers and other public companies for much-needed investment and job creation and hiring of new employees” said Rep. Huizenga.

Legislation requiring the National Credit Union Administration (NCUA) to conduct a study of the appropriate capital requirements for federal and state credit unions also passed the committee on Wednesday.  In January the NCUA issued a revised risk-based capital proposed rule for credit unions.  The bill’s sponsor, Rep. Stephen Fincher (R-TN), said it “would ensure the cost of this [NCUA] proposal is vetted relative to its impact on lending.”


Rep. Ann Wagner |  Wagner financial services bill, opposed by Obama, passes House committee

Rep. Ann Wagner's Retail Investor Protection Act passed the House Financial Services Committee Wednesday, setting up a vote in the full House of Representatives on an issue that the Obama administration has taken an opposing position.

Weekend Must Reads

Wall Street Journal |  Elizabeth Warren’s Intellectual Purge

President Obama has let Elizabeth Warren veto presidential appointments, and the power rush seems to have gone to her head. Now the Massachusetts Senator has forced the resignation of a Brookings Institution economist because he dared to report that new financial regulations will cost investors.

The Hill |
 CFPB should be bipartisan commission

From the very beginning, Sen. Warren (D-Mass.) and other supporters intended to structure what is now the Consumer Financial Protection Bureau as a bipartisan commission. Unfortunately, the dedication to a consumer agency led by a diverse board or commission did not last, and the CFPB that Congress created is headed by a single director. In this regard, the new CFPB is unlike most financial regulators in Washington, including the Federal Reserve Board, Federal Deposit Insurance Corp., Securities and Exchange Commission, and National Credit Union Administration.

Wall Street Journal |  The Jack Kemp Model for Republicans

Jack Kemp never became president, but the country desperately needs a leader like him now. When Kemp died in 2009, two themes dominated tributes to his career as a star quarterback, congressman, cabinet secretary and candidate for vice president and president. Conservatives called him one of the most influential politicians of the 20th century who never made it to the White House. He was “among the most important Congressmen in U.S. history,” as a Wall Street Journal editorial put it. Liberals declared that the Republican Party needed, but didn’t have, a Kemp: a leader who cared about the poor, who wanted to make the GOP attractive to minorities and working-class voters, who never went negative and regularly worked across party lines.

Investors Business Daily
CFPB Admits Using Bad Math To Restructure $900 Bil Auto Finance Industry

After accusing the ninth-largest bank auto lender of discriminating against minorities, the president's consumer watchdog admits his analysis is less than perfect.

Still, according to Monday's federal order, Cincinnati-based Fifth Third Bank will have to make $18 million in restitution for allegedly marking up loans for blacks and Latinos.

It will also have to cap the interest rates it charges customers, which Consumer Financial Protection Bureau chief Richard Cordray called "a significant step toward protecting consumers from discrimination."

Yet on Tuesday, as the ink was still drying on the settlement, Cordray confessed under grilling by House banking panel chief Jeb Hensarling that the disparate impact methodology that his agency uses to determine lending bias "overestimates" racial disparities in loan pricing.

    On the Horizon 

October 8, 2015 9:00 a.m.
Full Committee Hearing
“The Future of Housing in America: 50 Years of HUD and its impact on Federal Housing Policy.”

October 9, 2015 9:15 a.m.
Monetary Policy and Trade Subcommittee Hearing
"The Future of Multilateral Development Banks"

  In the News

Politico Pro |  House panel approves bill to block Labor Department's fiduciary rule

Wall Street Journal | Questions About Leak at Federal Reserve Escalate to Insider-Trading Probe

American Banker |  Some House Democrats Defect in Battle Over CFPB

Politico Pro |  House to vote next week on bill delaying CFPB enforcement of TRID rule

Washington Examiner |  GOP seeks to rein in Obama's finance bureau

Politico Pro |  CFPB's Cordray faces heat over auto lending, consumer data at House hearing

Wall Street Journal |  CFPB Head Defends Regulator’s Work Before Lawmakers

Posted by Staff on September 18, 2015
Dodd-Frank's Impact 5 Years Later: We Are Less Free

As the nation marked Constitution Day on Thursday, the Financial Services Committee heard from witnesses that the Dodd-Frank Act makes Americans less free.  By centralizing greater power in the hands of Washington bureaucrats, Dodd-Frank results in a less dynamic economy and a command-and-control system in which regulators dictate credit offerings and individual freedom and choice are sacrificed.

"Dodd-Frank erodes the economic freedom and opportunity that empowers low income Americans to rise and generate greater shared prosperity. Dodd-Frank moves us away from the equal protection offered by the impartial rule of law towards the unequal and victimizing rule of political bureaucrats. Of all the harm Dodd-Frank inflicts, this is the most profound and disturbing" Chairman Jeb Hensarling (R-TX) said.

Republicans highlighted the lack of accountability and unconstitutionality of the modern administrative state in which the rule of law is replaced by the rule of regulators.  Members and witnesses drove home the importance of the separation of powers and reiterated that while elected officials answer to their constituents back home, unelected bureaucrats who make sweeping regulatory decisions do not have the same accountability to the American people.  

Rep. Robert Hurt (R-VA) said he’s heard from his constituents about the impact Dodd-Frank is having on their lives.  “Constituents told me that while this law was touted as Washington’s attempt to protect consumers, in reality it has only left consumers with fewer choices and higher costs to access capital,” he said.  “In giving even more power to Washington bureaucrats, Dodd-Frank has made us less free and gravely inhibited individual freedom and choice.”

George Mason University law professor Todd Zywicki reminded the committee that freedom and an effective financial services system go together.  “Freedom to gain access to capital to start and grow a business, freedom to buy a home and provide for your family’s financial security, freedom to choose those whom you entrust with your hard-earned money provide the means for pursuing the American dream.”

MPBN News reported Rep. Bruce Poliquin’s (R-ME) comments at the hearing on the harm of Dodd-Frank’s regulatory burden.  "But now you have this big net - we do a lot of fishing up in Maine - and this big net is smothering everybody that should be able to swim through the net," he said.

Strong U.S. Leadership During Global Economic Turmoil is Essential

Members and witnesses at Thursday’s Monetary Policy and Trade Subcommittee hearing said recent global economic turmoil presents an opportunity for the United States to lead international economic policies away from government intervention and toward free markets, free trade and fiscal responsibility.

“The combination of debt and misguided policy decisions being implemented by countries across the globe provides the U.S. with an opportunity to reorient international priorities,” remarked Subcommittee Chairman Bill Huizenga (R-MI). “Today’s hearing urged the Obama Administration to advance a ‘back to basics’ approach to economic policy that prioritizes fiscal responsibility and free markets.”

Republican Members called the turmoil a clear indication that government intervention in the markets has serious consequences.  Members urged the Obama Administration to press China to commit to greater openness and transparency.  Members also called on the Administration and the IMF to recognize
the consequences of “moral hazard”—that is, the risks to the stability of the financial system that may result from underwriting imprudent bank lending practices and irresponsible fiscal policies by European governments.


Rep. Bruce Poliquin | Banking Regs Smothering Small Banks and Credit Unions

Poliquin told fellow members of the House Financial Services Committee that provisions aimed at big banks are being applied to small banks and credit unions.

Weekend Must Reads

 New poverty numbers highlight importance of jobs – not wages

Some might use the new data to show that more government intervention is needed to increase low wages.  But a deeper look at the data shows that a lack of work all together is the bigger culprit.

Wall Street Journal | Stuck on Zero

Zero rates channel credit to big companies, the well-to-do and government, while punishing savers and doing little for entrepreneurs and small businesses. The Fed’s monetary policy hesitation also feeds uncertainty, which further dampens business investment, which keeps growth low, while inflation never rises, and so the Fed is never confident enough in the economy to raise interest rates.

Wall Street Journal | Incomes and Poverty, 2014

The White House didn’t put out an official statement on the Census release, and perhaps commenting was too embarrassing politically. No President has done worse by the middle class in modern times. Absent a change of policy direction—prioritizing growth rather than social justice, measuring success by results instead of federal dollars spent—the unfortunate reality is that the future is unlikely to be better than today. No wonder so many Americans are anxious or angry.

Investor's Business Daily | Middle Class Lost In Obama's 'Middle Class Economics'

Obama's economy has been particularly harsh on those already at the bottom. Census data show that the bottom fifth of households saw their average income fall by 8% from 2009 to 2014.

    In the News

Politico | Federal Reserve to Leave its Main Borrowing Rate Near Zero

American Banker | Hensarling Requests GAO Study on Fed Dividend

The Hill | Dems not sold on Obama's financial adviser regs

Politico Pro | House Democrats request specific fixes to Labor Department fiduciary proposal

Washington Examiner | Poverty unchanged in 2014, 46.7 million impoverished

Credit Union Times | Duffy Urges CUs to Rat on Regulators: Onsite at NAFCU Caucus

Politico Pro | Yellen: Fed is cooperating with House subpoena

Palm Beach Post | Community bankers: We’re paying compliance officers to work for the government

Posted by Staff on September 11, 2015

Lawmakers Express Bipartisan Concerns Over Labor Dept. Retirement Regulation

A controversial regulation proposed by the Department of Labor will make it harder for Americans, especially those with lower and middle incomes, to plan for retirement said Republicans, several Democrats and witnesses at a joint subcommittee hearing on Thursday.

The Capital Markets and Government Sponsored Enterprises Subcommittee and the Oversight and Investigations Subcommittee held the hearing to examine the Labor Department's proposed "fiduciary rule," which will limit retirement choices and prevent lower and middle income savers from accessing affordable financial advice.

"Every day, millions of Americans look to a broker dealer or investment adviser for guidance on what to do with their hard-earned savings and to help them achieve a secure and prosperous retirement.  That makes it all the more curious that this same Department of Labor is now marching forward with a regulation that will upend the ability of Americans to receive such guidance and which threatens the retirement security of the most vulnerable within our society," said Capital Markets Subcommittee Chairman Scott Garrett (R-NJ).

Rep. Sean Duffy (R-WI), Chairman of the Oversight and Investigations Subcommittee, noted the proposed rulemaking has been described as "Obamacare for your IRA, and is yet another attempt by the Administration to perpetuate a 'government-knows-best' regime.  Americans should be able to make the investment choice that is right for them."

Expert witnesses at the hearing said the regulation will make the type of financial advice millions of Americans want either unaffordable or unavailable -- particularly for those who need it most.  "Under such a model, many will either pay more than they do today or will receive no advice at all," said one witness.

"There will be massive market disruption and many middle income savers will suffer without advice," said another witness.

Rep. Ann Wagner (R-MO) has introduced H.R. 1090, which would stop the Department of Labor’s misguided rule.  "This is good legislation that prevents an overzealous administration from taking away sound advice for low and middle income savers," she told reporters during an interview this week. 

Following the hearing, Chairman Jeb Hensarling (R-TX) said the Committee will advance Rep. Wagner's bill.  "We will stand with lower and middle income savers and prevent government bureaucrats from denying them access to reliable and affordable retirement saving options," he said 

Task Force Reviews U.S. Efforts to Combat Terror Financing 

The Task Force to Investigate Terrorism Financing held its fifth hearing since April on Wednesday to assess whether the United States is doing enough to stem the flow of funds to terrorist organizations.

"While the United States has significant tools at its disposal to degrade and inhibit terrorist financing and money laundering, it is unclear to what extent such tools have been effectively utilized," said Task Force Chairman Rep. Michael Fitzpatrick (R-PA) in his opening statement, "Today’s hearing will examine the current state of counter-terrorist financing efforts within the federal government to ensure that they are meeting each’s intended purpose and, should they not be, identify areas needing improvement."

Task Force members continued their discussions from previous hearings about the myriad ways terrorist organizations are able to finance their operations and the threat these groups pose to U.S. national security.

Concerns were expressed by both Republicans and Democrats on the Task Force that President Obama's nuclear deal with Iran will lead to more terrorism since Iran is the world's largest and most dangerous state sponsor of terrorism.

Task Force Vice Chairman Robert Pittenger (R-NC) said, “Iran will soon receive a windfall of over $100 billion, and their 46 banks will be integrated into the world’s financial system. Preventing these dollars from funding terror must be a priority."

Witness Scott Modell told the Task Force that the U.S. "will fall further behind" when it comes to combating terrorist financing if the Iranian nuclear agreement is implemented.  "If you look at the thousands of individuals and entities that have been designated as a result of Iran's illicit activities over the years that are now going to be exonerated essentially by this deal, of course it's a setback.  Those are people who are willingly engaged in criminal activity on behalf of the Iranian regime."


Rep. Sean Duffy | Duffy: Financial reforms have failed us 

In large part, the 2008 financial crisis was a result of federal financial regulators failing to do their jobs in the first place, coupled with a failure to anticipate the looming issues in the subprime mortgage market. What did Dodd-Frank do? It rewarded regulators’ incompetence with more responsibility, and it built a moat around “too big to fail institutions,” while making it difficult for small banks to stay afloat — to say nothing of the untold damage it has done to our economy. The law of unintended consequences has never been more apparent than when we look at Dodd-Frank.

Weekend Must Reads

Real Clear Politics | Can We Please Have a Rules-Based Policy?

And so much of the confusion stems from the fact that the Fed is still running a seat-of-the-pants policy based on the vagaries of monthly data points and daily stock market moves when it should adhere to a market price rule (commodity indexes including gold, the exchange value of the dollar, and Treasury bond spreads) that might really inform investors and govern Fed activity.

Wall Street Journal | At 50, This Housing Policy Needs a Big Renovation

As HUD marks its 50-year anniversary on Sept. 9, the challenges it faces are not on city streets or in homeless shelters, but within its own offices. Mission creep, management problems and criminal activity have rendered the agency a feeble instrument for renewing urban America.

 No, America Isn’t Moving Left

The real defect in the theory that America is moving left is that the polling evidence does not back it up.  The public has not turned to the left ideologically—and it remains unhappy with the status quo under Obama.

Forbes |
 Addressing the SEC's Administrative "Home Court" Advantage in Enforcement Proceedings

To date, the SEC has been silent on the central issue of the fairness of administrative proceedings and the objectivity of the ALJs, despite the fact that courts have noted it would be a relatively “easy fix” for the SEC to change the way it appoints judges.

    On the Horizon 

September 17, 2015 10:00 a.m.
Full Committee Hearing

"The Dodd-Frank Act Five Years Later: Are We More Free?"

September 17, 2015 2:00 p.m.
Monetary Policy and Trade Subcommittee Hearing

"Strengthening U.S. Leadership in a Turbulent Global Economy"

  In the News

Politico Pro | Iran the focus of terror finance task force hearing

Bloomberg | Lawmakers Seek Magic Number for Deal on SIFI Label Level

Reuters | U.S. outlines new policy for investigating corporate executives

St. Louis Post-Dispatch | Wagner Bill Heats Up Financial Services Fight

Washington Examiner | House Panel Will Move to Stop Labor Rule

New York Times | Companies Struggle With Rules on Conflict Minerals

Austin American-Statesman | Williams: Why I Will Oppose the Iran Deal

MPBN News | Bruce Poliquin Critical of Investment Advisor Regulations

Benefits Pro | Several Democrats Concerned Over DOL Fiduciary Rule

Think Advisor | Rep. Wagner Wants Bill to Halt DOL Fiduciary Rule Marked Up by Month-End

Plan Adviser | Legislators Hear Arguments About Fiduciary Reform

Kuwait News Agency | Kuwait’s Cooperation on Detecting Terrorism Financing “Impressive”

Posted by Staff on July 31, 2015
Committee Passes Federal Reserve Accountability, Bipartisan Reg Relief Bills

On Wednesday the Financial Services Committee passed several  bills designed to help grow the economy, create jobs and bring much-needed accountability and transparency to the Federal Reserve.

H.R. 3189, the Fed Oversight Reform and Modernization Act (FORM Act), requires the Federal Reserve to transparently communicate its monetary policy decisions to the American people.  Included among its reforms are changes that require the Fed to generate a monetary policy strategy of its own choosing.

“History – not theory, but history – shows that when the Fed follows a monetary policy strategy of its own choosing and transparently communicates that strategy to the rest of us, the economy performs better and more Americans get to wake up in the morning and go to work. The FORM Act protects the Fed’s independence to chart whatever monetary policy course it deems appropriate, but it has to give the American people a greater accounting of its actions," said Chairman Jeb Hensarling (R-TX).

The FORM Act’s sponsor, Monetary Policy and Trade Subcommittee Chairman Bill Huizenga (R-MI), added, "With the Federal Reserve having more power and responsibility than ever before, it is imperative the Fed changes its opaque structure and becomes more transparent and accountable to the American people. The Fed’s recent high degree of discretion and its lack of transparency in how it conducts monetary policy demonstrate that not only are reforms needed, but more importantly that reforms are necessary. We need to modernize the Federal Reserve and bring it into the 21st Century."

For more information on the bills that the committee passed this week, click here.

Dodd-Frank Leaves Americans Less Prosperous

The Committee held its second hearing this month focused on the consequences of the Dodd-Frank Act with a discussion of the sweeping law’s impact on Americans’ prosperity. 

Although President Obama promised Dodd-Frank would “lift the economy” when he signed the 2,300-page bill into law with much pomp and circumstance five years ago, Americans are instead stuck in the worst performing economic recovery since World War II – one that is even “weaker than previously thought, according to newly revised data,” the Wall Street Journal reported this week.  And ABC News reported this week that wage growth fell to a “record-slow pace” in the second quarter.

The Committee’s hearing, according to Investor’s Business Daily, offered “eye-opening testimony” that Dodd-Frank is “largely to blame for our lackluster economy.”

“I believe that all the new regulation added by the Dodd-Frank Act in 2010 is the primary reason for the slow growth this country has experienced since 2010,” testified Peter Wallison of the American Enterprise Institute.

Former Senator Phil Gramm, an economist who served as Chairman of the Senate Banking Committee, testified before the Committee that “the regulatory burden has exploded under Dodd-Frank” and today “we’re experiencing the poorest recovery in the post-war history of America.  If we had simply equaled the average of the 10 previous recoveries in the post-war period, 14.4 million more Americans would be working today and the average income of every man, woman, and child in the country would be over $6,000 higher.”  

Wallison, who served on the Financial Crisis Inquiry Commission, refuted some of the Democrats’ myths about the cause of the financial crisis.

“Now, predatory lending no doubt occurred, but the Financial Crisis Inquiry Commission was unable to find enough data to show that it was significant. What we learned from the financial crisis is that in 2008 more than half of all mortgages in the United States were subprime. And of those, 76 percent were on the books of government agencies -- primarily Fannie Mae and Freddie Mac, FHA too.  The point was here that the government had required certain quotas of mortgages to be made to people below median income.  Now, there was no reason why that was a bad idea except for the fact that if you make those quotas too high then the GSEs had to reduce their underwriting standards, which they did. That's why 81 percent of all of the losses that Fannie suffered they reported as coming from subprime and other low-quality mortgages,” Wallison explained.


Rep. Ed Royce | Bill to kill $3M raises for Fannie, Freddie CEOs gains momentum

“Congress needs to put a stop to the planned multi-million dollar paydays at Fannie Mae and Freddie Mac. Holding compensation packages at taxpayer-backed organizations to responsible limits is in the interest of the public trust,” Royce said in advance of his bill being marked up.

Weekend Must Reads

Investor's Business Daily | How Dodd-Frank Ate The U.S. Economic Recovery

Dodd-Frank has led to a decline in small banks and rising market share for the very largest. A cynic might suspect this was how it was designed to be. But what it's done to the economy is worse.

International Business Times
| Dodd Frank Act Killing US Banks? Only 3 New Financial Institutions Have Opened Since 2010

One explanation for the lack of new banks in recent years might be the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in 2010. Before the act was passed, the banking industry was spurring, and over 100 new banks popped onto the scene every year, according to data from the Federal Deposit Insurance Corporation, which is responsible for approving new banks.

Wall Street Journal | Dodd-Frank’s Unhappy Birthday

A unanimous three-judge panel of the D.C. Circuit Court of Appeals ruled that State National Bank of Big Spring has standing to challenge the CFPB’s constitutionality. The bank, supported by a legal team including former White House counsel Boyden Gray and the Competitive Enterprise Institute, argues that the agency violates the Constitution’s separation of powers. The bureau is an independent agency and thus largely unaccountable to the President. But because it draws funding directly from the Federal Reserve, rather than appropriations, it is also largely unaccountable to Congress. And it can declare lending practices abusive at its whim. Don’t be surprised if this is another case that makes it to the Supreme Court.

AEIdeas | The Wrong Directions for Poverty Policy

If the best antipoverty program is a job, government should support policies aimed at job growth, and should not increase wages for some while making employment harder to find for others.

    In the News

Wall Street Journal | House Committee Approves Federal Reserve Overhaul Bill

Washington Examiner | Fed Faces a Laundry List of Reform Measures

Wall Street Journal | Lawmakers Move to Halt Fannie, Freddie Pay Raises

Bloomberg | House Panel Approves Bills Meant to Help Small Banks

American Banker | Your Definitive Guide for the Latest Slew of House Banking Votes

Housing Wire | Dodd-Frank dragging down economic recovery, House Committee says

The Hill | House members push Obama to start over on financial adviser rule

Housing Wire | Bill to eliminate $6M raise for Fannie, Freddie CEOs passes House Committee 57-1

Automotive News | U.S. House committee approves limit on CFPB's oversight of auto lending

Bloomberg | Fed Accidentally Released Confidential Staff Projections

National Mortgage News | House Committee Passes Bills to Delay TRID Enforcement, Revise QM

DSNews House | Committee Passes 14 Bills, Including Regulatory Relief and Fed Reform 

Posted by Staff on July 24, 2015
Committee Explores Appropriate Level of Capital and Liquidity

The full committee held a hearing to delve in to the issue of "too big to fail" and to hear from experts on the appropriate levels of capital and liquidity for U.S. banks to function properly and help foster economic growth.

"Since the crisis, U.S. banks have raised more than $400 billion in new capital and regulators have required institutions to maintain higher capital buffers -- again, under the authority they possessed pre-Dodd-FrankI for one believe that generally this to be a good thing. But the capital standards that were already complex have become even more complex with Basel III. I do not necessarily believe this to be a good thing," remarked Chairman Jeb Hensarling (R-TX) in his opening statement.

He continued, "There are a number of questions this committee must explore. One, again, although capital and liquidity standards have increased post-crisis, do we really know by how much? How opaque do balance sheets still appear? How many items that were once off balance sheet will find their way back onto balance sheets? What amount of capital is the proper amount? Too much, economic growth can stall. Too little and too many failures could yet ensue."

Rep. Sean Duffy (R-WI) noted lawmakers' acknowledgement of Dodd-Frank's clear failure to end "too big to fail." "It's fascinating listening to my friends across the aisle as they've grown over the last four and a half years. They started off telling us how Dodd-Frank was going to end 'too big to fail,' it was a sure fix to end 'too big to fail,' if you listen to the debates with former Chairman Frank. That was the reason why we have a 2,000-plus page bill, why we have 400 new rules. But the tone has changed. They're now admitting that Dodd-Frank in all of its sweeping reforms does not end 'too big to fail.'"

Subcommittee Reviews Proposals for Greater Accountability and Transparency at the Federal Reserve

On Wednesday the Monetary Policy and Trade Subcommittee held a hearing to review legislative proposals that would reform the Federal Reserve. These reforms would bring about a more transparent and accountable Federal Reserve in regard to its operations and decision-making in monetary policy.

"Last Congress, as we examined the Fed’s actions over the last 100 years through the Federal Reserve Centennial Oversight Project, it became clear that the Federal Reserve has gone above and beyond its original mission statement. In fact, since the enactment of Dodd-Frank, the Federal Reserve has gained unprecedented power, influence, and control over the financial system while remaining shrouded in mystery to the American people," said Subcommittee Chairman Bill Huizenga (R-MI). "The Fed must be accountable to the people’s representatives as well as to the hardworking taxpayers themselves."

Rep. Luke Messer (R-IN) spoke about the many Americans who are still suffering from the financial crisis and deserve to have an accountable and transparent Federal Reserve. "I think the American people look at all of what happened, and they understand. They don't know all the complexities but from their perspective, it looks something like this - there are a whole lot of rich people who are part of creating this crisis. The crisis happened and all those rich people are still rich, and the average working family is struggling. Their savings haven't improved. Their wages are flat, and they see a process that seems not very transparent, and they want to know who's accountable and responsible for it."

Task Force Considers Iran Nuclear Deal’s Implications on Financing Terrorists

The Task Force to Investigate Terrorism Financing held a hearing on Tuesday to examine the possible consequences of the Obama administration’s nuclear deal with Iran, part of which involves the lessening or removing of economic sanctions placed on Iran in the past.

“It appears this agreement fails to address the realities surrounding Iran’s sponsorship of terror, while further empowering its mullahs by infusing billions of dollars into its economy through lifting the sanctions that successfully brought Iran to the negotiating table in the first place,” said Task Force Chairman Mike Fitzpatrick (R-PA). “The Iranian regime has demonstrated a lack of concern about its own people, leaving little doubt the estimated $150 billion in funds currently held abroad will allow the Iranian economy to fully recover – not to the benefit of its oppressed citizens – but to the advantage of the next generation of terror syndicates.”

Rep. Ann Wagner (R-MO) also weighed in with her concerns about how the economic boost for Iran might lead to undesirable outcomes for the United States and its allies in the region. “The president has agreed to far-reaching concessions in nearly every area that was supposed to prevent Iran from acquiring a nuclear weapon. Under this deal, Iran would receive $100 billion to $150 billion in sanctions relief and regain access to conventional arms and ballistic missiles that has been denied for nearly a decade. Iran will be free to transfer these weapons, as has been stated, to Hezbollah, the Syrian government, Yemeni rebels, and other terrorist groups. These organizations threaten the security of the United States, our ally Israel, and the world, and will further destabilize a region already in crisis.”

Subcommittee Conducts Oversight of the National Credit Union Administration

The Financial Institutions and Consumer Credit Subcommittee held a hearing to examine the National Credit Union Administration's (NCUA) operations and budget. Credit unions have been shutting down in alarming numbers and unable to fully serve their customers' needs due to overwhelming federal regulations. In lights of these circumstances, Subcommittee Members questioned NCUA Chair Debbie Matz on how the agency allocates its budget and how their policies affect the fiscal health of credit unions.

“Credit unions in particular share a unique relationship with local communities. After all, they are cooperatives at their core. They help bring unserved and underserved customers into the financial mainstream. They provide that first credit card for young adults trying to build credit. They help the first-time homebuyer purchase the home they have been dreaming of," said Subcommittee Chairman Randy Neugebauer (R-TX) in his opening statement. “Unfortunately, credit unions, like community banks, are suffering from ‘one size fits all’ regulatory actions from federal regulators. For example, some credit unions now under go stress testing like their larger bank counterparts. Because of this increased regulatory burden and the related compliance costs, we have seen massive consolidation of credit unions and inflexible product standardization, which has limited consumer choice."


Rep. Scott Tipton | Examining Dodd-Frank’s first five years
The regulatory burden under Dodd-Frank Act has imposed 61 million paperwork burden hours — at $24 billion in compliance costs — according to one calculation, with the hardest hit being small financial firms. During a visit to First Colorado National Bank, a locally-owned bank with a $50 million dollar portfolio in Delta, I heard first-hand how much of a toll this law has taken on banks that are the lifeblood of small communities’ economies. Instead of hiring tellers and loan officers, these banks are hiring compliance staff in order to keep up with new regulations. It is disappointing to hear that small bankers no longer feel like they run their bank, but that the federal government runs their bank for them.

To read other comments Committee Members issued this week on the harm caused by the Dodd-Frank Act, click here.

Weekend Must Reads

Wall Street Journal | Dodd-Frank’s Nasty Double Whammy

To limit abuse by the rulers, ancient Rome wrote down the law and permitted citizens to read it. Under Dodd-Frank, regulatory authority is now so broad and so vague that this practice is no longer followed in America. The rules are now whatever regulators say they are.

The Hill | Five years after Dodd-Frank, time for a course correction at CFPB

Most Americans don’t know about the existence of the CFPB, but Dodd-Frank’s out of control law enforcement agency is turning out to be perhaps the most powerful agency nobody has ever heard of. According to a USCC-Zogby Analytics poll in June, 2015, less than one in five Americans know the CFPB exists. From all indications, the CFPB would like to keep it that way.

Forbes | Dodd-Frank At 5 Years Old: Making The Next Crash More Likely And Worse When It Happens

You don’t reduce risk by concentrating it. What you’ve done there is concentrate risk.

    On the Horizon 

July 28, 2015 10:00 a.m.
Full Committee Hearing

"The Dodd-Frank Act Five Years Later: Are We More Prosperous?"

July 28, 2015 2:00 p.m.
Full Committee Markup

"Markup of H.R. 766, H.R. 1210, H.R. 1317, H.R. 1553, H.R. 1737, H.R. 1839, H.R. 1941, H.R. 2091, H.R. 2243, H.R. 2643, H.R. 2912, H.R. 3032, H.R. 3189, and H.R. 3192"

  In the News

The Hill | Hensarling: No more birthdays for Dodd-Frank

Pittsburgh Tribune | Dodd-Frank Turns 5: What a Mess

Chicago Tribune | Five Years Later, Dodd-Frank Still Falls Short

Miami Herald | Fix the Dodd-Frank Law

The Hill | Hensarling: Dodd-Frank made country 'less financially stable'

Wall Street Journal | House Republican’s Proposal Takes Aim at Fed Powers

American Banker | House Panel Debates Bills to Rein In Fed's Authority

Bucks County Courier Times | Fitzpatrick Referees Hearing on Iran Nuclear Deal

Northwest Arkansas Democrat Gazette | Hill wants details on money flow to Iran

Credit Union Times | Credit Unions Don’t Represent Their Members: Matz

Wall Street Journal | Raising Ex-Im From the Dead

Politico | Democrats’ New Cause: Dodd-Frank

Washington Examiner | Dodd-Frank at 5: Helping Big Banks Get Bigger

LA Times | Key Regulatory Job Created at Federal Reserve Still Vacant After Five Years

Orange County Register | Time to revisit Dodd-Frank banking restrictions

Posted by on July 20, 2015


By Jeb Hensarling
Click here to read article

Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the legislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”

None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.

Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.

Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.

Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.

Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.

Has Dodd-Frank nevertheless made the financial system more secure? Many of the threats to financial stability identified in the latest report of Dodd-Frank’s Financial Stability Oversight Council are primarily the result of the law itself, along with other government policies.

Dodd-Frank’s Volcker rule banning proprietary trading by banks, and other postcrisis regulatory mandates, has drastically reduced liquidity for making markets in fixed-income assets. The corporate bond market is one of the primary channels for capital formation in the economy. Reduced liquidity in this market amplifies volatility. Because of Dodd-Frank, financial markets will have less capacity to deal with shocks and are more likely to seize up in a panic. Many economists believe this could be the source of the next financial crisis.

Dodd-Frank’s scheme for regulating derivatives markets concentrates systemic risks into clearinghouses and then designates the clearinghouses as too big to fail. Dodd-Frank’s “orderly liquidation authority” enshrines taxpayer-funded bailouts into law. Meanwhile, the Fed, by keeping interest rates too low for too long, is introducing dangerous imbalances into financial markets and is likely inflating asset bubbles.

What is most disturbing about Dodd-Frank is the authority it gives bureaucrats to control huge swaths of the economy. The director of the Consumer Financial Protection Bureau, an agency created by Dodd-Frank, can declare any consumer-credit product “unfair” or “abusive” and outlaw it. Oversight? CFPB funding is not subject to congressional appropriations, and Dodd-Frank requires courts to grant the bureau deference regarding its interpretation of federal consumer-financial law.

Dodd-Frank requires that bank holding companies worth $50 billion or more must submit a “living will” to the Federal Deposit Insurance Corp. and the Fed. This “will” is a detailed plan for how the company will cope in case of severe financial problems. If the plan is not to the regulators’ liking, they can require the company to restructure, raise capital, divest or downsize.

The “heightened prudential supervision” Dodd-Frank allows the Fed to exercise over “systemically important” banks essentially places them under government control. Soon the Fed may exercise effective control over the largest insurance companies and asset managers as well. After AIG and GE Capital were designated “systemically important,” Fed officials, according to a Financial Times story last August, became de facto board members of the firms, involving themselves in decisions including whether employees should be fired or disciplined.

Before Dodd-Frank’s passage, former Sen. Chris Dodd said that “no one will know until this is actually in place how it works.” Today we know. The law he co-wrote with former Rep. Barney Frank is gradually turning America’s largest financial institutions into functional utilities and taking the power to allocate capital—the lifeblood of the U.S. economy—away from the free market and delivering it to political actors in Washington.

Five years ago, House Republicans offered the Consumer Protection and Regulatory Enhancement Act as an alternative to Dodd-Frank. It sought to restore market discipline, end taxpayer bailouts and protect consumers with innovative, competitive markets policed for fraud and deception. It’s time to revisit the ideas in that bill, offer new ones and replace Dodd-Frank.