Congresswoman Maxine Waters, Ranking Member of the House Financial Services Committee, led committee Democrats today in encouraging Financial Services Committee Members to, “read the law,” in hopes to “facilitate a rational discussion based on actual provisions within the law.” During the full committee hearing titled, “Examining How the Dodd-Frank Act Could Result in More Taxpayer-Funded Bailouts,” Waters said, “I have found that not enough attention has been paid to the actual legislative text. I believe the law may provide answers to many of our questions today, which is why I would encourage my colleagues to read the law.”
Opening statement as prepared for delivery:
Thank you, Mr. Chairman. I welcome today’s hearing as an opportunity to examine Titles I and II of Dodd-Frank, and assess whether these provisions will achieve their intended goals of protecting taxpayers and preserving financial stability. I want to thank our esteemed panel of witnesses for joining us today, and I look forward to their insight and testimony on these critical issues.
While there has been significant public debate regarding Wall Street Reform, I have found that not enough attention has been paid to the actual legislative text. I believe the law may provide answers to many of our questions today, which is why I would encourage my colleagues to read the law.
Title I of Dodd-Frank established the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) to monitor systemic risk and potential threats to financial stability. Title I also gives federal regulators enhanced prudential authorities over systemically significant financial institutions and requires these firms to submit credible resolution plans known as “living wills.”
The living wills are intended to reveal weaknesses and complexity as well as provide a roadmap for how these institutions may be orderly liquidated. The law requires firms to pursue bankruptcy as a first resort. However, if bankruptcy compromises financial stability, the statute authorizes regulators to use an alternative tool for resolving systemically complex firms.
Title II of Dodd-Frank created the Orderly Liquidation Authority (OLA). According to Section 204 of Title II, the purpose of OLA is to provide banking regulators with “the necessary authority to liquidate failing financial companies that pose a significant risk to the financial stability of the United States in a manner that mitigates such risk and minimizes moral hazard.”
Moreover, Title II, Section 214 of Dodd-Frank provides that “all financial companies placed into receivership under this title shall be liquidated. No taxpayer funds shall be used to prevent the liquidation of any financial company.” The law also requires that any funds expended in the liquidation of a financial firm must be recovered through assessments on the financial sector.
Title XI, Section 1101 repeals the financing mechanisms the Federal Reserve used to bail out financial institutions in 2008. The law mandates that any new Federal Reserve policies governing emergency lending serve the purpose of providing liquidity to the financial system – not one failing firm in particular – and that such policies must protect taxpayers from losses.
Repealing Title II of the Dodd-Frank Act will make the financial system less stable and invite the chaos of the 2008 crisis on our current recovery, and would be a huge step in the wrong direction: it will not make megabanks any less large or any less complex. In fact, repealing Title II would take us back to the status quo use of the bankruptcy code which would put taxpayers and the financial system at risk.
Today, my colleagues and I are going to use today’s hearing as an opportunity to incorporate the relevant provisions of Titles I and II outlining regulators new systemic risk and resolution authorities.
Each of us will focus on a particular section of law, explain what the provisions of the law authorize, and at times we will ask witnesses to expound on any ambiguity concerning how regulators may interpret their enumerated authorities.
It is my hope that this will facilitate a rational discussion of important issues based on actual provisions within in the law.
I yield back the balance of my time.