Republicans to Unveil Alternative Legislation to Repeal and Replace Dodd-Frank Act
by Ali Meyer
May 13, 2016
Source: Washington Free Beacon
Republicans on the House Financial Services Committee, led by Chairman Jeb Hensarling (R., Texas), are set to unveil new legislation in the coming weeks that would effectively repeal and replace the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law by President Obama after the financial crisis of 2008, driven by arguments that the legislation would “promote the financial stability of the United States by improving accountability and transparency in the financial system,” and that it would put an end to “too big to fail” banks.
“When they voted for it, supporters of Dodd-Frank said it would promote financial stability, end too big to fail, and lift the economy,” said Hensarling in his remarks at the National Center for Policy Analysis event on Thursday. “None of this has come to pass. Instead, five and a half years later, it has become evident that our society has become less stable, less prosperous, and most ominously, less free.”
“Its foundation very much rests on a false premise: that somehow deregulation was the root cause of the crisis,” Hensarling said. “But it was not deregulation. In fact, in the decade leading up to the financial crisis regulatory restrictions in the financial sector actually increased.”
According to Hensarling, the act has not only codified too big to fail and put taxpayer funded bailouts into law but has hurt everyday Americans by killing off a benefit that many have taken for granted—free checking.
“Before it became law, 75 percent of all banks offered free checking,” Hensarling said. “Just two years later, roughly half do so. Furthermore, as account fees rise due to Dodd-Frank, so do the number of low and moderate income households that are unbanked or underbanked.”
“When you think about Dodd-Frank’s Qualified Mortgage Rule, roughly 20 percent of the people who qualified for a mortgage in 2010 will no longer be able to qualify due to its rigid debt-to-income ratio,” he said. “There are 15 percent fewer credit cards, and they cost 200 basis points more—and the list of economic harm of Dodd-Frank continues.”
Republicans are planning to roll out legislation that will repeal and replace Dodd-Frank in the next few weeks, which they say will provide regulatory relief from Washington micromanagement.
“If financial institutions elect to hold strong, Tier I capital, they will gain strong regulatory relief from both Dodd-Frank and Basel’s burdensome regulations and capital standards,” explained Hensarling. “In a nutshell, if a bank chooses to have a fortress balance sheet that protects taxpayers and minimizes systemic risk, then bankers ought to be allowed to be bankers and grow our economy.”
According to Hensarling, the alternative to Dodd-Frank will be based on the principles that taxpayer bailouts of financial institutions must end and no company can remain too big to fail; systemic risk must be reduced through market discipline; consumers must be protected from force, fraud, and deception; simplicity must replace complexity; economic growth must be restored through transparent and innovative capital markets; and every American must have an opportunity to achieve financial independence.