Background: In response to the financial crisis of 2007-08 and the Great Recession, Congress rushed through Dodd-Frank under the guise of “consumer protection.” This law imposes 3,500-plus pages of new rules and regulations on the financial industry. Dodd-Frank codified “too big to fail” policies, destroyed local community banks, restricted access to credit for investors and homebuyers, raised lending costs, reduced access to capital for businesses, and created one of the most powerful and unaccountable federal agencies in the Consumer Financial Protection Bureau (CFPB).
Instead of addressing the causes of the financial crisis, including the government’s reckless efforts to expand housing affordability and implied guarantee to bail out large financial institutions, Dodd-Frank has empowered the very regulatory establishment that caused the financial crisis to begin with. If that isn’t bad enough, Dodd-Frank is one of the major factors responsible for the U.S.’s slow economic recovery.
The Financial CHOICE Act: On June 6, 2016, House Financial Services Committee Chairman Jeb Hensarling (R-TX) unveiled his plan to repeal most of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. His legislation, entitled the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs) Act, is a significant, positive step toward repealing Dodd-Frank and restoring economic stability and growth to the financial and housing markets.
Key Provisions: The Financial CHOICE Act has seven key provisions that will help restore economic growth.
- Mitigates “too big to fail” and bank bailouts by repealing most of Title I and all of Title VII of Dodd-Frank.
- Stops the government from seizing troubled financial firms through orderly liquidation and returns to a time-tested bankruptcy system by repealing Title II of Dodd-Frank.
- Fundamentally reforms the CFPB by restructuring the independent agency into a five-member bipartisan commission, subject to congressional oversight and the appropriations process.
- Reins in the Federal Reserve’s emergency lending authority by making it more difficult for the Fed to conduct bailout-style loans to insolvent firms.
- Unleashes small business creation, innovation, and entrepreneurship by eliminating the misguided Volcker rule which has severely limited capital formation over the past few years.
- Subjects all new major rules imposed by financial regulatory agencies to Congressional approval under the Regulations from the Executive in Need of Scrutiny (REINS) Act.
- Strengthens penalties on Wall Street for those who engage in fraud, insider trading, and other corrupt practices.
Conclusion: The Financial CHOICE Act repeals most of Dodd-Frank and represents a major first step toward much needed regulatory relief essential for revitalizing our economy. Republican members of Congress have repeatedly promised to get rid of Dodd-Frank and stop taxpayer funded bailouts. The Financial CHOICE Act presents Congressional Republicans with the perfect opportunity to fulfill their promise.