In Case You Missed It

By Rep. Spencer Bachus
Politico

The Dodd-Frank Act has been described by supporters and opponents alike as the most sweeping reform of the financial services industry since the Great Depression. It can also be described as a story of the “good, the bad and the ugly.”

A few of its provisions represent useful reforms to a financial system that came close to the brink of collapse in the fall of 2008, but the “bad and the ugly” parts far outweigh those. And their impact on our economy will be staggering.

The two primary factors that drive our economy, capital and workforce, will both be harmed by Dodd-Frank. Tucked into the law’s 2,300 pages are 400 regulatory mandates that will be imposed on the private sector. Both financial and nonfinancial businesses will be forced to shift capital from hiring, investments in new equipment and other productive uses to comply with these new rules. Likewise, these businesses will have to redirect their workers’ time and energy to compliance rather than productive work.

The supporters of Dodd-Frank sold it as tough “Wall Street reform.” Still, the greatest regulatory burden will be borne by those far from Wall Street.

“What we have to understand is we’re already overburdened with regulation. We have significant numbers of regs that we need to comply with today, and it seems like just one more isn’t going to change the deck a whole lot, but the consistent piling on of additional regulation is very, very stunning,” said Greg Ohlendorf, president of First Community Bank and Trust in Beecher, Ill.

“It’s punishing.”

Small town banks like First Community and their customers did not cause the financial crisis. Yet they — and the rest of us — are forced to live with the bloated bureaucracy, more government control and still more uncertainty that the government’s response to the crisis gave birth to.

That high level of uncertainty is the primary roadblock to our recovery. When you add the mountain of new rules required by Dodd-Frank to those of Obamacare, plus the threat of higher taxes caused by Washington’s spending spree, you get an astounding level of apprehension and plunging confidence for employers and their customers. You get uneasiness among banks that flows down to businesses and consumers in the form of tight credit.

The disastrous consequences for our economy are very real. Access to capital is restricted. Fewer loans are made to meet the needs of individuals and small businesses. Job opportunities vanish.

As another local banker summed it up at a hearing on the impact Dodd-Frank will have on small-business lending: “Each new regulation … adds another layer of complexity and cost of doing business. The Dodd-Frank Act will add an additional, enormous burden, has stimulated an environment of uncertainty and has added new risks that will inevitably translate into fewer loans to small businesses.”

Small businesses create the vast majority of new jobs in our economy. Fewer loans to small businesses mean fewer jobs. It’s that simple.

For all its problems, we need to remember the American economy is still the largest in the world, representing 25 percent of world production.

Government planning and control are not how we got here. Individual initiative and free markets have long been the recipe for our dynamic economy. Unfortunately, the regulatory structure created by Dodd-Frank will completely alter the way our economy operates, constricting jobs and penalizing Main Street businesses.

While Dodd-Frank does all this to harm our economy, it unfortunately fails to even address the biggest cause of the financial crisis: the government-sponsored enterprises, Fannie Mae and Freddie Mac that fueled the riot of imprudent lending that knocked our economy down to its knees.

Fannie and Freddie continue to hemorrhage hundreds of billions of dollars, and the only way to protect taxpayers from having to dump even more money into these failures is to reform the GSEs. Yet Dodd-Frank does nothing about Fannie and Freddie.

This time of economic and regulatory uncertainty requires all of us to work together to avoid policies that prevent critical investment by our small businesses. All of us recognize the importance of consumer protection and the need to avoid the mistakes and malfeasance that led to the financial crisis. Nonetheless, we must take extreme care to ensure we adopt policies that grow our economy and create jobs.

The Dodd-Frank Act is a roadblock to our nation’s recovery. On its one-year anniversary, members of Congress from both sides of the aisle should join to fix its provisions that harm our economy and prevent job creation, so our economy can gain the certainty it needs.

Rep. Spencer Bachus (R-Ala.) is chairman of the House Financial Services Committee.