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Hensarling Remarks to the Exchequer Club

Washington, November 16, 2016 -

Financial Services Committee Chairman Jeb Hensarling (R-TX)

Remarks to the Exchequer Club, Nov. 16, 2016

*As Prepared for Delivery

Good afternoon, everyone.  I’m Jeb Hensarling – and I approve this message.

No, I think we’ve all had enough of that to last us for a while.  Our long national nightmare is finally over:  the 2016 campaign.  Don’t worry; it will be at least a couple of weeks before the next campaign season really picks back up again.  Just for fun, the other day I googled “2020 presidential election.”  It lists 49 potential candidates.  So get ready, America!  We’ve only got about 1,155 days to Iowa! 

Thank you for inviting me to speak today.  It’s been a while since I’ve spoken to the Exchequer Club, and it’s been a while since I’ve been in Washington.  As all of you know, members of Congress have been back in our home states for several weeks.  Some of you may know it as “flyover country.”

But it’s really the Heartland of America.  By electing Donald Trump our next president, the people of the Heartland rose up and sent a clear message to the ruling elites last week.  They’re not going to take it anymore and they expect change. 

And they have every right to be upset.  They see themselves working too hard and not getting ahead – like trying to run up the down escalator.  This economy is still not working for working people. 

They’re upset at seeing their dreams for their children’s future diminished. They’re upset at of seeing their values ridiculed and scorned by the establishment. 

And every day they see their liberties and opportunities slipping away as Washington grows larger, more intrusive, more distant, more powerful and more arrogant.

So a hard fought election may be over, but our work is just beginning.  We must now help bring our country together and advance the cause of a better, stronger, more prosperous America.  I believe if we adhere to the Founders’ principles, we can put in place policies that create the real change Americans so desperately want. 

The Founders believed “We the People” were capable of governing ourselves.  They distrusted unchecked power, so they limited government and promoted individual freedom, free enterprise and the rule of law. 

These principles are what enable equal opportunity, prosperity and civil society to flourish. 

And on the Financial Services Committee, these principles are embodied in the proposals we offer and which I’ll discuss later, such as the Financial CHOICE Act to promote economic growth for all and bank bailouts for none, the FORM Act to bring accountability and transparency to the Federal Reserve, the PATH Act to create a sustainable housing finance system, and numerous other ideas to help Americans on Main Street achieve financial independence and a better, more hopeful life.

Regrettably, when Americans look at Washington today, they see our federal government has drifted far from the Founders’ vision.  Instead of limited government comprised of three accountable branches, they see power concentrated into a large and intrusive centralized government, ruled not by “we the people” but by so-called experts in a new fourth branch that reaches further and deeper into our lives and tries to make decisions for us.

The rise of this fourth branch of government should concern every American.  Because the rise of agency government risks turning our elections into a hollow exercise.  As author and scholar Steven Hayward wrote, if we allow government to be run by unaccountable bureaucrats then “elections no longer change the character of…government” because “no matter who wins…the experts in the agencies rule and every day extend their rule further.”

And up until last Tuesday’s election of Donald Trump, millions have felt powerless to change it. 

As Professor Jonathan Turley, a nationally recognized legal scholar at George Washington University has pointed out, this unaccountable fourth branch “now has a larger practical impact on the lives of citizens than all the other branches combined.”

Very few government policies, for example, have a more profound impact on the lives of working men and women than those that affect their ability to have a secure retirement.

Yet no one elected by the people had a hand in developing the Department of Labor’s so-called fiduciary rule, which will affect how investment advice is provided to every 401(k) plan, every IRA, and every rollover or distribution to or from either. 

Altogether, the rule is going to impact about $3 trillion of hardworking Americans’ retirement assets.  It will make access to financial advice more costly and less available to millions of lower and middle income workers -- and no one in Congress voted for it.

The effects are already being felt months ahead of implementation.  Merrill Lynch has already announced its clients will no longer be able to buy mutual funds in certain retirement accounts.

Others have protested the rule’s particularly harmful impact on those who work at small businesses.

“This rule would put a significant burden on small businesses and their employees, making it less likely that we will be sufficiently prepared for retirement,” says John Raine, president of a small manufacturing firm in Indiana.

The Trump Administration, working with our Republican majority in Congress, should make sure this harmful, bureaucratic rule does not go into effect as planned in just five months.  This is just one example of how unelected, unaccountable government hurts working people.

Another example is the CFPB’s rule that would shut down small dollar lenders without a single vote ever being cast in Congress.

How important is small dollar lending? Let me tell you the story of Robert Sherrill.  He was a hardened drug dealer.  Eventually his crimes caught up with him and he spent several years in prison, but somehow he emerged with a resolve to build a better life for himself. 

The only problem was that no one would take a risk on Robert.  He couldn’t get a job.  He couldn’t get a loan.  He couldn’t even get a bank account.  The deck was stacked against him.  It was against these odds that Robert decided that if he was going to turn his life around, he needed to start his own business.

Enter a local small dollar lender who understood Robert’s situation and designed a financial product to fit his needs.

 “The payday loan I got…was a lifeline.  It enabled me to start a business,” Robert said.

Today he employs 20 people.  He is a member of his local Chamber of Commerce and Better Business Bureau.  He is a productive citizen of his community.  He went from serving hard time to making it possible for others to live better times. 

And it would not have been possible if he couldn’t access a small dollar loan that the CFPB today essentially wants to outlaw – again, without a vote by Congress. These are just two examples of rule promulgated by the unelected and the unaccountable. These are just two rules that hurt struggling citizens. And these are two examples of rules the House Financial Services Committee, working with a President Trump, hopes to reverse.

Article One, Section One of our Constitution states “all legislative powers herein granted shall be vested in a Congress.” 

It is time for Congress to take greater responsibility for federal regulations, because when Congress allows its legislative authority to be usurped, the people’s right to both self-government and due process is undermined.  Instead of being governed by the rule of law, citizens become more and more governed by the rule of rulers.

On the Financial Services Committee, one of our top priorities for the 115th Congress is to arrest this assault on the people’s constitutional right to self-rule.  They have been deprived of their voice for too long.  We will work to make government accountable again.

Accountability is at the heart of our Republican plan to repeal and replace Dodd-Frank, called the Financial CHOICE Act.  It demands greater accountability from both Washington and Wall Street.

It makes sure every financial regulation passes a cost-benefit test, also known as common sense, so we’ll know a proposed rule’s impact on economic growth before it takes effect. 

With the exception of the Federal Reserve’s conduct of monetary policy, it puts all financial regulatory agencies on budget, because the bare minimum level of accountability to “We the People” is to have their elected representatives in Congress control the power of the purse.

Our plan also holds Washington accountable by converting financial regulatory agencies presently headed by single directors – the CFPB, the Office of Comptroller of the Currency, and the Federal Housing Finance Agency – into bipartisan commissions. A bipartisan structure will result in better rulemakings as agencies start considering multiple viewpoints and perspectives.

Another critically important provision of the Financial CHOICE Act requires all major financial regulations to first be approved by Congress before they can take effect. 

This reform has already passed the House as the REINS Act, and it effectively returns Article 1 lawmaking to its rightful place:  Congress. 

Next, we repeal the Chevron doctrine.  This doctrine allows the bureaucrats to put their thumbs on the scales of justice, making sure the judiciary always gives deference to their interpretation of the law. The Chevron doctrine is unfair, it’s an affront to due process and justice, and if we’re going to make government truly accountable to the people, the Chevron doctrine has got to go.

At the same time the Financial CHOICE Act holds Washington accountable, it also holds Wall Street accountable.  It imposes the toughest penalties in history for those who commit financial fraud and deception.  We must ensure consumers and investors are protected, treated fairly and have access to competitive, transparent and innovative markets that are vigorously policed for fraud and deception.

In addition to greater accountability, another key part of our committee’s agenda is to end too big to fail once and for all.

Proponents of Dodd-Frank promised it would end too big to fail and taxpayer-funded bailouts.  But it did the exact opposite.  Dodd-Frank writes too big to fail and taxpayer-funded bailouts into law.

Republicans on the Financial Services Committee offer a simple answer to this problem:  bankruptcy, not bailouts. 

A new subchapter of the Bankruptcy Code tailored to specifically address the failure of a large, complex financial institution is part of our Financial CHOICE Act.  Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.

And while we’re on the subject of bailouts, another major focus for our committee in 2017 will be the reauthorization of the National Flood Insurance Program, which is set to expire at the end of September. 

Unfortunately, this government monopoly is beyond broke – it is bailout broke.  $23 billion in debt thanks to Byzantine rules, misguided subsidies and zero consumer choice.

To fix this unsustainable situation, we will pass a reauthorization bill that begins the transition to a competitive, innovative and sustainable flood insurance market where consumers have real choices.

At a time when the Richmond Federal Reserve’s “bailout barometer” shows that U.S. taxpayers stand behind 60 percent of all financial system liabilities, ending too big to fail and getting more private capital into the flood insurance program are paramount.

Our committee will also continue working to relieve financial institutions from regulations that create more burden than benefit.  Our Financial CHOICE Act replaces growth-strangling red tape with the reliable accountability of higher and simpler capital requirements. 

This approach not only helps unleash greater opportunities for small businesses, innovators and job creators, it also stops investors from betting with taxpayer money. 

For banks willing to put their investors in front of hardworking taxpayers in the event of a failure, the Republican plan will free banks to help more Americans finance their individual American dreams.

And for millions of Americans, the very definition of the American dream is owning a home of their own. 

Regrettably, Dodd-Frank and the CFPB make it harder for Americans to achieve that dream. 

They give Washington elites the power to decide who can qualify for a mortgage, and that’s why the Federal Reserve reports one-third of black and Hispanic borrowers will be hurt by the CFPB’s Qualified Mortgage rule when it is fully phased in, based solely on its rigid debt-to-income ratio.  And again, all without a vote by Congress.

The American people deserve a better path forward – one that leads to a sustainable and fair housing finance system, so everyone who works hard and plays by the rules can have opportunities and choices to buy homes they can afford to keep.

At its core, the housing market is not fundamentally different from the market for any other asset. Housing is not immune to the economic laws of supply and demand or risk and reward.

Thus, Republicans offered the PATH Act, which principally relies upon private capital and market discipline to create a sustainable housing finance system.  The PATH Act includes four fundamental goals essential to the development of any free market.

First, the role of government is clearly defined and limited.  Second, artificial barriers to private capital are removed to attract investment and encourage innovation.  Third, market participants are given clear, transparent, and enforceable rules to foster competition and restore market discipline.  Lastly, consumers are afforded informed choices in determining which mortgage products best suit their needs.

The PATH Act specifically:

  • Ends the costly Fannie and Freddie bailout;
  • Protects and restores the FHA by defining its mission;
  • Increases mortgage competition, enhances transparency, and maximizes consumer choice; and
  • Breaks down barriers to private investment capital.

It’s been more than 8 years since the financial crisis, which was largely caused by Washington’s misguided housing policies.  It’s been more than 6 years since Dodd-Frank failed to do anything about Fannie Mae and Freddie Mac. 

It’s not easy; it’s the very definition of a “heavy lift,” but our committee looks forward to working with the Trump administration, to finally building a housing finance system that is sustainable for homeowners, for hardworking taxpayers, and for our economy. 

Ladies and gentlemen, free enterprise has made America the fairest, most prosperous, most creative, most generous, and most compassionate society the world has ever known. 

Nothing else has lifted more people out of poverty.  And no other economic system allows people to earn their success through hard work, personal responsibility and individual initiative.

But instead of encouraging and helping people earn their success, Washington’s approach to poverty creates dependency on the state.  It strips people of the dignity that comes from earning their own way.  You would be hard pressed to create a system that is less compassionate. 

As the Dalai Lama recently reminded us in the pages of the New York Times:  “A compassionate society must protect the vulnerable while ensuring…policies do not trap people in misery and dependence.”

HUD was supposed to be one of Washington’s chief weapons in the War on Poverty launched by President Johnson more than 50 years ago.  Yet HUD’s public housing projects are typically any city’s most despairing places, where generations of poverty-stricken families are warehoused and sealed off from the best schools, best job opportunities and safest neighborhoods.

HUD symbolizes the Left’s top-down, command and control, centralized planning approach that measures compassion for the poor based on how many programs Washington creates and how much money it spends.

As chairman of the committee with jurisdiction over HUD, I am committed to bringing new ideas to the table on better ways to fight poverty.  There is without a doubt a proper and important role for government assistance.  We must always have a strong social safety net below which no one can fall. 

But right alongside that safety net, there needs to be – as former HUD Secretary Jack Kemp called it – “a ladder of opportunity on which everyone can climb.”

That ladder of opportunity is work.  The best anti-poverty program ever devised is a job, even a part-time job.  Of all adults who were living in poverty in 2014, almost two in three were not working at all.  Compare that to only 2.7 percent of full-time workers and only 17.5 percent of part-time workers living in poverty.

We have a moral responsibility to lift these Americans up. 

Let me tell you another story.  I’ll never forget the single mom I met who was working at a retail store in Dallas. 

Before getting her job, she told me she had lived her entire life in public housing in New Orleans until Hurricane Katrina hit and, like many, fled to safety in Texas with her children.  Away from public housing’s desperate environment for the first time, she was finally able to take control of her life.  “Now when there’s food on the table, my sons know I provided it through my hard work.  Now when there’s a roof over their heads, they know that’s because of me,” she said.

She reminds us all that a job is more than just a paycheck.  It’s about dignity and respect. 

And we want all those struggling in poverty to know the pride and dignity that comes with work. 

Under the leadership of Speaker Ryan, House Republicans have put forward a far-reaching blueprint to empower all Americans to achieve the American Dream. 

I was honored to be part of the task force that developed this plan, which includes reforms to ensure able-bodied adults work or prepare for work in exchange for receiving taxpayer benefits, including housing assistance. 

Such reforms are truly compassionate because they aim to liberate the poor from lives of hopeless dependency, to lives of independence and economic opportunity.

And speaking of economic opportunity, our economy would be healthier – and more Americans would have the opportunity to achieve success – if the Federal Reserve did not wander into fiscal policy, and were more predictable in its conduct of monetary policy and more transparent about its decision-making. 

Today we’re merely left with so-called “forward guidance,” which is unfortunately amorphous, opaque and improvisational.  It leaves hardworking taxpayers uncertain as they attempt to plan their economic future. 

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. 

Therefore, reform of the Fed remains a top priority.  The House-passed 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.

Lastly, there is one other issue I want to discuss that doesn’t fall exclusively under the jurisdiction of the Financial Services Committee, but is such an enormous threat to the well-being of every American it must be on the agenda of every committee, and that’s our unsustainable national debt.

The number and trends could not be clearer.  Under President Obama, our national debt has nearly doubled to an astounding $19.8 trillion.  The portion of the debt owed to U.S. and foreign investors now represents the largest share of the economy since 1950 and is on track to hit the highest level in recorded history.  GAO reports our debt will grow to three times the size of the economy over the next 20 years.     

For over 200 years a core part of our collective American ethos was “we work hard today so our children can have a better life tomorrow.”  But Washington’s insatiable greed means we’re letting government live better today, so our children will have to work harder tomorrow.

My children Claire and Travis are the reason why I gave up a career in the private sector to serve in Congress.  And I will devote every ounce of my being, my heart and my soul to stopping Washington from mortgaging their futures and forfeiting the torch of liberty that rightfully belongs to my children and yours. 

We cannot allow the debt deniers in Congress to make them the first generation of Americans to live with less freedom, less opportunity, and a lower of standard of living.

In Washington, I’ve learned to go to work each day with high hopes and tempered expectations.  But the agenda I’ve just outlined – accountability for Washington and Wall Street, economic growth for all, regulatory relief, an end to taxpayer-funded bailouts, helping Americans escape poverty, and confronting the national debt – this should be a bipartisan agenda.  Democrats should be just as interested as Republicans in tackling each one of these challenges.

Even though Republicans will be nominally in charge of both ends of Pennsylvania Avenue soon, I remain painfully aware of the Senate’s cloture rules.  That means there will continue to be a need to work with the other party.  I’m certainly willing to negotiate in good faith on any proposal – from the Financial CHOICE Act to housing finance reform and anything else that comes before our committee.  And it is with great pride that I note that during the 114th Congress, our committee has successfully guided 76 bills to House passage.   That’s 66 percent of all measures reported out of our committee.  32 committee bills were signed into law, including 9 that make needed changes to Dodd-Frank.  All of them had bipartisan support.

I’m told that’s one of the best – if not the best – performance record of any major House committee.  With government so divided, that’s not bad at all – and I’m proud of the hard work of so many of our members who reached across the aisle and put forward good, common sense solutions.

I have an open mind, but it is not an empty mind.  And I never tire or falter in the advancement of the principles of freedom, free enterprise and limited constitutional government. 

Today, millions of our fellow citizens face stagnant wages, excessive tax burdens, rising health care costs, barriers to work and upward mobility, and an economy held back by hyper-regulation, cronyism and unsustainable debt. 

The work ahead will be hard and demands the best of us.  But that’s exactly what the American people deserve.  Let’s get started.  Thank you.

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