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The House passed bipartisan legislation on Tuesday that provides important regulatory relief for small banks and credit unions and protects consumer access to mortgage credit.
The CFPB�s expansion of escrow requirements and guidance on escrow and mortgage servicing requirements are prime examples of the regulatory burden placed on community financial institutions.
With the smaller staff and resources of community institutions, existing escrow rules are financially and technically prohibitive. Many community banks and credit unions lack the resources to create and maintain escrow accounts in house, and outsourcing the work is, for the most part, cost prohibitive. The burdensome and expensive escrow requirements force small lenders to increase costs for consumers or out of the mortgage market altogether.
The Community Institution Mortgage Relief Act would relieve certain smaller banks and credit unions � those with consolidated assets of $10 billion or less and who hold the mortgage on their balance sheet for three years, and those that service 20,000 or fewer mortgage loans annually � from this onerous regulation and allow them to do what they do best: serve the financial needs of the local economy through relationship banking.
“H.R. 3971 is a narrowly focused, modest effort to resolve concerns related to the CFPB’s rules implementing Dodd-Frank Act provisions on escrows and mortgage servicing. These important fixes will give smaller credit unions and community banks greater flexibility to ensure that more of their members and customers can get a loan to buy a home and stay in their homes,” said House Financial Services Committee Chairman Jeb Hensarling (R-TX). “I thank Representative Tenney, a member of the Financial Services Committee, for introducing this legislation and for leading Congressional efforts to help provide regulatory relief for small banks and credit unions from rules that are unfairly restricting consumers� access to mortgage credit.”
The bill�s sponsor, Rep. Claudia Tenney (R-NY), said “This bipartisan bill is a step in the right direction to rollback harmful regulations that have crippled our community financial institutions. Mandating one-size-fits-all regulations places costly and unmanageable burdens on our small financial institutions. This shows just how out-of-touch Washington bureaucrats are with our local communities. The Community Institution Mortgage Relief Act works to reverse this problem by lowering the cost of credit for low-income borrowers and rolling back onerous escrow regulations that continue to drive community institutions out of the mortgage lending market. I�m grateful to Chairman Hensarling for his leadership in working to pass this important bill, and I look forward to continuing to work alongside the Financial Services Committee to roll back onerous regulations and get our economy moving again.”
The bill passed the House with bipartisan support 294-129.
When I talk to constituents in western Pennsylvania, I hear a common concern: some in this country are thriving and getting ahead, but many believe the American dream is moving further from their reach. Big businesses, the wealthy and well-connected are doing fine, while millions of hard-working Americans � mom-and-pop business owners and those on Main Street � face one barrier after another to their success.
Today, we have a two-speed economy, but all Americans deserve a chance at success, not just those in Washington, D.C., or those at the top.
A major cause of this two-speed economy is the failed Dodd-Frank financial control law that was imposed after the financial crisis. That bill, which spawned thousands of pages of new rules and regulations, promised an end to “Too Big to Fail” and a return to a healthy, stable economy.
Unfortunately, the outcome has been the exact opposite.
Over-regulated community banks are being merged into bigger banks, households have lost access to vital financial services, and capital for small businesses has dried up.
If anything, “Too Big to Fail” has been enshrined in law and small banks have been dubbed “Too Small to Succeed.”
House Republicans� Financial CHOICE Act, however, will roll back Dodd-Frank�s misguided policies and replace them with new rules that will create more opportunity, choice and economic freedom for all Americans.
I support the Financial CHOICE Act because I know that it will revitalize our economy by creating the conditions for competitive, transparent and innovative capital markets. Yet, there are those � especially big banks � who oppose Financial CHOICE.
That is because the many reforms we propose are designed not to bolster the big banks, but to level the playing field for small financial institutions, some 1,600 of which have either closed or been forced to merge since the implementation of Dodd-Frank.
Financial CHOICE gives everyone a fair chance at the American dream.
Our bill accomplishes this by right-sizing regulations for community banks and incentivizing firms to adopt more conservative practices such as holding high levels of capital.
When institutions begin to flourish and thrive again, lower-income and middle-class consumers, as well as small businesses, that rely on the services of community banks will once again have more choices and better access to the products and services they need to live their daily lives and conduct their businesses.
The Financial CHOICE Act also holds bad actors accountable by increasing penalties for financial fraud. In fact, we are proposing the toughest penalties in history for financial fraud.
Our bill also promises to end “Too Big to Fail” � taxpayer-funded bailouts will be stopped once and for all.
One of the worst outcomes of Dodd-Frank was that it prompted unelected regulators to come up with thousands of pages of rules, many of which hurt consumer choice and stifled economic growth. The people�s elected representatives were largely removed from the process, giving unaccountable bureaucrats unchecked power to micromanage our financial system.
The Financial CHOICE Act fixes the rulemaking process by increasing transparency, enhancing the voice of Congress and ensuring that the rules that govern our economy are subject to cost-benefit analysis. At the very least, Washington should not support policies that hurt more than they help.
President Donald Trump spoke during his inaugural address of the “forgotten man and woman” in America.
Washington over-regulation, too, often does them real harm. The Financial CHOICE Act offers a better way � more accountability, more transparency, tougher penalties, and good regulation.
If the reforms in the Financial CHOICE Act become law, we can say goodbye to the two-speed economy and hello to financial choice and opportunity for all Americans.
U.S. Rep. Keith Rothfus, R-Sewickley, represents the 12th Congressional District.
Congress will soon vote on a plan to significantly overhaul the 2010 financial control law commonly known as the Dodd-Frank Act.
This is great news for jobs and growth in Kentucky. In the nearly seven years since enactment of the 2,300-page Dodd-Frank law, roughly one in five Kentucky credit unions and community banks has closed its doors.
Nationwide, more than 43 percent of banks under $100 million in assets have disappeared. And whereas nearly 170 new banks were chartered on average per year before the financial crisis, there have been only six new bank charters total since Dodd-Frank.
This decline in community financial institutions, which account for 43 percent of all loans to small businesses and represent the only physical banking presence in 20 percent of the counties in the United States, has limited access to essential financial services and products.
For example, 72 percent of community banks report that Dodd-Frank rules have restricted their ability to extend credit for mortgages, and small-business lending from banks is at a 20-year low.
By limiting services at community financial institutions, Dodd-Frank regulations are clogging the plumbing of our economy, especially in rural and underserved communities.
For these reasons, I have been working with my colleagues on the House Financial Services Committee on a Dodd-Frank fix called the Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs. This legislation will end taxpayer bailouts for “too-big-to-fail” Wall Street firms, provide Main Street community banks and credit unions an “off-ramp” from the central planning of Dodd-Frank and provide much-needed reform to the unaccountable Consumer Financial Protection Bureau.
Dodd-Frank was supposed to solve the problem of “too-big-to-fail.” Instead, it codified into law taxpayer bailouts of large, systemically important firms. As a result, not only are small banks fewer, but Wall Street banks are bigger.
The Financial CHOICE Act will end taxpayer bailouts of big banks by replacing Dodd-Frank�s “Orderly Liquidation Authority” with a new chapter of the bankruptcy code that will better accommodate the failure of large, systemically important financial institutions, or “SIFIs.” It also repeals regulators� authority to designate non-bank SIFIs, which signals to investors which firms would likely be bailed out by taxpayers.
Together, these provisions would thwart the contagion of “moral hazard” that occurred during the run up to the financial crisis, when some firms, including government-sponsored enterprises Fannie Mae and Freddie Mac, took on excess leverage and risk with full knowledge that Uncle Sam would bail them out in the event of a crisis. And the legislation further holds Wall Street accountable by imposing the most severe penalties in American history for financial fraud and other crimes.
Meanwhile, the Financial CHOICE Act would deliver much needed regulatory relief to Main Street.
Instead of punishing all financial institutions with Dodd-Frank rules and regulations, the Financial CHOICE Act would allow a bank or credit union to escape much of the regulatory central planning of Dodd-Frank in exchange for maintaining a simple 10 percent leverage ratio. Adequate capitalization would prevent these institutions from overextending themselves in good times and protect them from defaults in bad times.
Finally, our legislation would implement much needed reforms to the Consumer Financial Protection Bureau to enable it to better protect consumers and make it more accountable to the American people. The Financial CHOICE Act does this by subjecting the bureau to the congressional appropriations process, giving Congress the power of the purse over this agency and its regulatory overreaches for the first time. It would also reform the bureau�s unconstitutional structure by making its director removable at will by the president, establishing a Senate-confirmed inspector general, requiring cost-benefit analysis of regulatory proposals, and requiring the bureau to obtain permission prior to collecting consumers� private financial information.
As local organizations that understand the damage Dodd Frank is doing to our economy, it is no surprise that the Kentucky Bankers Association, the Kentucky Credit Union League and Commerce Lexington have all endorsed the Financial CHOICE Act. By enacting this important legislation, we can finally hold Wall Street and Washington accountable, deliver much-needed relief to Main Street community financial institutions and create more opportunities for all Americans.
Legislation to end bank bailouts, toughen penalties for wrongdoing on Wall Street, promote economic growth, and provide desperately needed regulatory relief for small community banks and credit unions passed the House Financial Services Committee 34-26 today.
The legislation � the Financial CHOICE Act � ends the Dodd-Frank Act�s taxpayer-funded bailouts of large financial institutions and imposes the toughest penalties in history on those who commit fraud and insider trading. The bill also demands greater accountability from Washington regulators and relieves well-capitalized banks from growth-strangling regulations that slow the economy and harm consumers.
CHOICE, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, received strong support from community banks and credit unions. Large financial institutions did not offer their support for the Financial CHOICE Act. Instead, Wall Street CEOs have said they do not support repealing Dodd-Frank.
“The Financial CHOICE Act ends bailouts so Washington can never again pick taxpayers� pockets and hand the money over to big banks. With the Financial CHOICE Act, the era of big bank bailouts and ‘too big to fail� will be over. There will be bankruptcy for failed banks, not bailouts. And banks that qualify for much-needed regulatory relief will be so well-capitalized that they pose no threat to taxpayers or the economy. Our plan replaces Dodd-Frank�s growth-strangling regulations on small banks and credit unions with reforms that expand access to capital so small businesses on Main Street can grow and create jobs,” said Chairman Jeb Hensarling (R-TX).
Vice Chairman Patrick McHenry (R-NC) said, “Since President Obama signed it into law, Dodd-Frank has made it more expensive for American families to save and borrow while also creating a regulatory climate that has hurt small business growth nationwide. Today�s vote on the Financial CHOICE Act is an important step in our work to undo the damage done over the last seven years.”
Oversight and Investigations Subcommittee Chairman Ann Wagner (R-MO) said, “For nearly 8 years, the Dodd-Frank Act and the Obama Administration�s ‘Washington-knows-best� mindset have crippled the growth of our national economy. When I voted today to pass the Financial CHOICE Act out of Committee, I kept the needs of our families and small businesses in mind. Americans deserve greater access to consumer products and advice, more transparency and accountability, and most of all a stronger economy that boasts a level playing field and spurs job growth and creation. The Financial CHOICE Act will deliver on these promises we made in November and I applaud Chairman Hensarling for his leadership in moving this legislation forward.”
Monetary Policy and Trade Subcommittee Chairman Andy Barr (R-KY) said, “Seven years after enactment of the Dodd-Frank Act, it is clear we need significant reforms to better protect consumers, grow our economy, and provide regulatory relief. The Financial CHOICE Act will deliver these reforms to ensure all Americans have greater opportunities and that hard working taxpayers are never again asked to bailout Wall Street�s biggest banks. I appreciate the leadership of Chairman Jeb Hensarling in shepherding this bill successfully through the Financial Services Committee markup and I look forward to working with him and my colleagues to provide relief for the customers of Kentucky�s community banks and credit unions.”
Financial Institutions and Consumer Credit Subcommittee Chairman Blaine Luetkemeyer (R-MO) said, “The premise of the Financial CHOICE Act is simple: change the current regulatory paradigm in order to offer a new model that benefits taxpayers, consumers, and our local communities. The CHOICE Act will hold Washington and Wall Street accountable by replacing ‘too big to fail� with bankruptcy and ‘too small to succeed� with some common-sense regulatory relief. I�m proud to have worked with Chairman Hensarling on this critical legislation so that every American has the opportunity to achieve financial independence. The passage of the CHOICE Act is a victory for consumers, taxpayers, and economic growth.”
Terrorism and Illicit Finance Subcommittee Chairman Steve Pearce (R-NM) said, “What was intended to serve as a watchdog over large financial institutions, ended up crippling consumer access to credit and financial services. Dodd-Frank has forced banks to push burdensome regulatory fees onto the backs of hardworking families, individuals, and small businesses. The community banks in rural parts of America seem to be the ones carrying the heaviest burdens of these regulations. The reality is, Wall Street is not going to come to New Mexico to help people in rural communities afford housing, nor will they come out to lend to our small businesses that help strengthen our economy. Small financial institutions are the lifeblood of New Mexican businesses and families, and we must support them. The CHOICE Act will overhaul these Dodd-Frank regulations that areas like my district will benefit from the most.”
Capital Markets, Securities and Investment Subcommittee Chairman Bill Huizenga (R-MI) said, “For the last six years, Dodd-Frank has made it more difficult for hardworking Americans to secure a future for themselves and their children. Today, House Republicans took an important step forward in the effort to reverse that trend and strengthen our economy by advancing the Financial CHOICE Act. The Financial CHOICE Act enacts pro-growth reforms that allow community banks and credit unions to better serve their customers and facilitate small business job creation, restores accountability to both Wall Street and Washington, and protects taxpayers from future taxpayer-funded bailouts by ending ‘too big to fail� once and for all. Additionally, the Financial CHOICE Act takes crucial steps to modernize the Federal Reserve and make it more accountable and transparent to the American people. These important reforms include an audit of the Fed so policymakers and everyday Americans have a more informed understanding of how the Fed is impacting our economy. I look forward to continuing this important debate as the full House of Representatives considers this critical piece of legislation.”
Housing and Insurance Subcommittee Chairman Sean Duffy (R-WI) said, “Millions of Americans are still suffering from President Obama�s economic policies, and the disastrous Dodd-Frank Act. Since it was shoved through Congress, bank fees have gone up, free checking is all but gone, and small community banks have been choked out of existence. Dodd-Frank�s regulations have made it harder to achieve the American Dream. Thankfully, under Chairman Hensarling�s leadership, there is a better way. The Financial CHOICE Act is an off-ramp from Dodd-Frank�s rules and regulations, will help restore our small community banks and credit unions to their important role in our communities, and will jumpstart economic growth. I am pleased that several of my ideas are incorporated into the bill, including reining in the CFPB by prohibiting them from soliciting information on non-public personal information without your permission, putting a stop to the CFPB’s wasteful use of taxpayer dollars, and making significant changes to the SEC on the registration of proxy advisory firms that prohibit unfair, coercive, and deceptive practices.”
For more information about the Financial CHOICE Act, including an executive summary, a comprehensive and legislative text, please visit www.FinancialCHOICE.gop.
Under the Obama Administration we saw the rise of imperial Washington, D.C., with the crushing weight of regulations from healthcare to energy to financial services harming small businesses and families from the coasts to the heartland. I hear it from my constituents each and every time I am in the grocery store in St. Louis or at Mass on Sundays � they’re hurting, and they’re hurting because of unelected, unaccountable bureaucrats in Washington who are dictating their financial decisions and have no connection to the lives led by everyday Americans.
The Obama-era behemoth known as The Dodd�Frank Wall Street Reform and Consumer Protection Act has targeted Main Street pocketbooks and stripped families of real opportunities for financial success and independence. For nearly 10 years following our country’s financial crisis, our country witnessed one of the weakest recoveries of our lifetimes, as Dodd-Frank held small businesses and families hostage and prevented our economy from growing. We’ve also watched as bureaucrats at the Consumer Financial Protection Bureau (CFPB) have spent years removing choices and making access to financial products more difficult to obtain. Under the well-messaged guise of “consumer protection,” the Bureau has continuously failed to properly monitor actual instances of consumer fraud, just as we saw with the opening of more than a million unauthorized accounts at Wells Fargo.
Plain and simple, since the CFPB’s creation under Dodd-Frank we have seen egregious regulations put in place that make it harder for families to qualify for a mortgage, obtain an auto loan and access other forms of credit that they depend on every day. Something as simple as free checking has become burdensome under the dominion of Dodd-Frank, as 75 percent of banks offered this product before the law was passed, and just two years later only 39 percent of banks offered free checking.
But our Republican-led Congress has a better way � The Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs. And that’s exactly what we’re going to do: provide you with the financial opportunities you deserve.
As a member of the House Financial Services Committee, I know the Financial CHOICE Act will help reverse years of mismanagement and unaccountability, while fueling our economy to provide Missourians and all Americans with more jobs, higher wages and faster growth. The Financial CHOICE Act will also allow us to impose the toughest penalties onto Wall Street executives who engage in fraud, deception and self-dealing. Unlike before, executives who commit financial crimes will be held accountable, rather than innocent taxpayers and shareholders.
Through the Financial CHOICE Act, Congress has a profound opportunity to replace Dodd-Frank, increase lending in our communities, open up our economy, end taxpayer-funded bank bailouts and hold Wall Street and Washington accountable. Plain and simple, Americans should be excited about the Financial CHOICE Act. Through this legislation, we’re going to reverse years of misconduct and finally get our economy back on track.
In November, Americans spoke loud and clear in favor of a government that would be less-intrusive and offer more opportunities for success. As Congress works with the Trump Administration to pass the Financial CHOICE Act, I am keeping you in mind. You deserve greater access to consumer products and advice, you deserve more transparency and accountability, and most of all you deserve a stronger economy that boasts a level playing field and spurs job growth and creation. We will deliver on these promises.
Congresswoman Ann Wagner (R-MO) represents the Second District of Missouri and serves as chairman of the House Financial Services Oversight and Investigations Subcommittee. Prior to being elected to Congress in 2012, she served as U.S. Ambassador to Luxembourg under President George W. Bush.
The United States has a rich history of bank crises. In fact, we�re number two in the world, with 13 all-time, just behind France with 15, and just ahead of the United Kingdom, with 12. Our first major banking regulation law, the National Currency Act, was passed in 1863 as a response to a bank failure rate of fifty percent. Each successive crisis, the Panic of 1907, the Great Depression, the Savings and Loan Crisis of 1982, the Housing Bust of 2007 (to name a few) triggered a new wave of financial regulation. Dodd-Frank, passed in early 2010, is the latest of these waves.
There�s a saying in the military that generals spend a great deal of time fighting the last war. It strikes me, looking at the historical pattern, that this is also true of financial regulators. They pass laws and make changes based on what happened last time, but the next crisis is always based on a new systemic weakness that no one sees. Dodd-Frank builds on this history by adding major new regulations that create massive compliance costs while keeping the same problems that led to the crisis in the first place.
I came to Congress a little over four months ago. If I leave Washington having helped put through a law that will break the bailout, regulate, rinse, repeat cycle, I will consider the time away from home well spent. I serve on the Financial Services Committee, and we�re working on a bill that I think will go a long way towards stopping the bailouts, while at the same time cutting back on the Dodd-Frank red tape that�s been slowly strangling community banks.
The core of our bill, the Financial Choice Act, is relatively simple, as bank regulation goes. Under the bill, banks in essence have two options: they can live under Dodd-Frank, or they can keep a certain amount of high-quality capital on hand to cushion losses. That amount, or ratio, is around 10 percent of their total loans or investments, more than triple what the big banks had on hand pre-financial crisis. In fact, of the banks that did have a 10 percent ratio during the crisis, more than 98 percent survived. Right now most of the big banks are hovering a little above 6 percent, and requiring them to go to ten would cost them billions in foregone profits. If that means that the system as a whole is more durable and banks get out from under Dodd-Frank, then I think that�s a fair tradeoff.
Most community banks, on the other hand, are well above 10 percent. For instance, Blue Harbor Bank in my district has a ratio of 15 percent. That�s not out of the goodness of their heart�community banks know that if they fail, the federal government won�t bail them out, so they have to operate more conservatively. They don�t get to cover their bets with taxpayer funds, and as a result they�re more careful with the loans and investments they do make. At the same time, they�re hit with Dodd-Frank regulations. Even now, large banks keep lower ratios in part because of the widespread assumption that they will be bailed out in a crisis. What the 10 percent requirement of the Financial Choice act is about is levelling the playing field�treating all banks equally, large and small.
That brings me to another feature of the bill, which creates an orderly method to unwind failed financial institutions through the bankruptcy courts. Chapter 11 bankruptcy has historically been the way insolvent business are dealt with, providing a path for debtors to continue business operations and creditors to get their money back, if possible. It�s not well-designed for large financial institutions because it does not take into account the notion that the company in bankruptcy may impact the national economy, something that is true for very large banks but not for most companies.
The Financial Choice Act adds a new section to chapter 11 to allow financial regulators the opportunity to participate in the bankruptcy process, and to ensure that bankruptcy of a large bank does not cause a full-blown crisis. The benefits of having a clear process up front for unwinding big banks means that there�s a clear plan of action in case a crisis occurs, eliminating the need for bailouts.
Together, these two provisions both significantly reduce the chance of future crises, and reduce the chance of future bailouts. There is no question that our country will have its 14th financial crisis at some point in the future. We owe it to the country to do everything we can to make sure that we reduce its impact through sound regulation, so that when it does happen, big banks that take on too much risk are subject to the discipline of a well-established legal process, not a bailout.
Congressman Ted Budd serves the people of North Carolina�s 13th congressional district in the U.S. House of Representatives.
Economists at a prominent think tank based in Washington, D.C. last week reported that a full repeal of the Dodd-Frank Wall Street Reform and Consumer Protection Act would boost the economy by one percent and generate $340 billion in federal revenue over a 10 year period.
Dodd-Frank, as it is called for short, was passed by the Democrat controlled Congress and signed into law by President Obama in 2010. At more than 2,000 pages, the law is the most sweeping financial regulation enacted since the Great Depression era.
It was sold to the American public as a Washington crackdown on greedy Wall Street banks that put the U.S. economy into a tailspin. Crafty messaging professionals created an advertising gimmick in the title of the law itself.
But as the saying goes: You can�t judge a book by its cover.
Rightfully, at the time, the American people wanted their government to respond to an economic collapse and it did. The problem was that the action that was taken did too little to prevent history from repeating itself and too much to hurt the little guys that were in no way responsible for the Great Recession.
In our home state of Texas, since Dodd-Frank�s implementation, community banks have closed their doors and no new banks have been chartered. Considering most small businesses, which represent 99.7 percent of all U.S. businesses, rely on local lenders to expand, create jobs and conduct further research and development, Dodd-Frank has, and will continue to have, negative effects on the U.S. economy.
In a recent op-ed in The Hill newspaper, those same think-tank economists wrote, “There is good reason to believe (Dodd-Frank) may also increase the frequency and severity of recessions and may diminish innovation in the financial sector and elsewhere.” Simply, Dodd-Frank was the wrong prescription for our nation�s troubled financial sector.
That is why my colleagues and I on the House Financial Services Committee have a plan that will actually prevent a similar financial collapse from happening again while, at the same time, lessen the current overregulation of Main Street.
Our Dodd-Frank replacement, the CHOICE Act, will impose the toughest penalties in history for financial fraud and will once and for all end taxpayer funded bank bailouts.
The CHOICE Act will force more accountability on both the banks on Wall Street and on the bureaucracies in Washington that have forced unnecessary, costly compliance measures on mom-and-pop shops throughout the country. Washington�s regulators will be accountable to members of Congress, rather than being allowed to make decisions without any repercussions from American voters.
In a recent piece that I wrote with U.S. Sen. David Perdue, we said that legitimate oversight over the financial sector is important. Very few, if any, lawmakers will disagree with this sentiment.
Today, the federal government is wrongly deflecting blame to smaller financial institutions that cannot, and should not be required to, meet arbitrary compliance measures that are forcing them out of business. The CHOICE Act will correct that and actually punish bad actors who wreak havoc on the livelihoods of everyday hardworking Americans.
Williams, a Republican from Austin, serves on the Financial Services Committee in the U.S. House of Representatives. He is the vice-chair of the subcommittee on Monetary Policy and Trade.
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The months following the 2008 financial crisis were devastating for many Americans. Hardworking men and women lost their jobs, their savings, their pensions, and their homes. But instead of taking steps to strengthen consumer protections and bring stability to the financial system, Congress and the Obama Administration responded with the Dodd-Frank Act.
This piece of legislation and its associated financial regulations made an already complex regulatory environment even more complicated, made “too big to fail” the law of the land, and ultimately created new barriers for individuals and families seeking to better their lives.
To understand the negative impact that the Dodd-Frank Act has had on communities across the country, we must look at the effect that the law and its associated regulations have had on the U.S. gross domestic product (GDP), which is the aggregate measure of economic growth. In May 2015, the American Action Forum (AAF) estimated that Dodd-Frank would reduce GDP by $895 billion between 2016 and 2025. In 2016, the U.S. saw only 1.6 percent GDP growth, and the Congressional Budget Office has predicted long-term average GDP growth of only 2 percent.
What does this mean for the average American? The GDP is directly related to the U.S. standard of living, which is defined as the “degree of wealth and material comfort available to a person or community.” An analysis by the AAF shows that 2 percent GDP growth combined with 1 percent projected population growth translates to only 1 percent per capita GDP growth. At only 1 percent per capita GDP growth, it will take the average person roughly 70 years to double their standard of living.
This projection is startling, especially when we think about young adults who are entering the workforce in their twenties. In 2015, an analysis by the Economic Policy Institute showed that on average, young high school graduates working full-time had an annual income of $21,600. Young college graduates working full time had an average annual income of $37,300. With only 2 percent GDP growth, the average young person would have to work well into their nineties to double their income.
It doesn�t sound like we are setting our kids on a prosperous path, does it?
Under the leadership of Chairman Jeb Hensarling, the Financial Services Committee has developed the Financial CHOICE � creating hope and opportunity for investors, consumers, and entrepreneurs � Act to help jumpstart our economy and create more jobs and opportunities for families and individuals across the country.
Among the many provisions included in the Financial CHOICE Act is my bill, the Taking Account of Institutions with Low Operation Risk (TAILOR) Act. The TAILOR Act will help reform one-size-fits-all regulations and restore job creation on Main Street by ensuring community banks in Colorado aren�t regulated the same way as the big banks on Wall Street.
Additional provisions in the CHOICE Act:
- Impose some of the toughest penalties in history for financial fraud;
- Prevent another tax-payer bailout by requiring greater capital reserves for any financial institution seeking relief from onerous regulations;
- Reduce obstacles for small businesses seeking credit and capital in order to promote job creation;
- Roll back regulatory taxes that are restricting families� access to financial services like free checking accounts.
It is well past time that Congress remedy the consequences of Dodd-Frank and our overly complicated financial regulatory system. The Financial CHOICE Act will help individuals and families say goodbye to the policies that are holding them back, and I�m looking forward to delivering these important reforms to Coloradans and all Americans.
Eight years ago, the nation experienced the worst financial crisis in 80 years, which cost millions of Americans their savings, their homes, and their jobs. The response � one that was well-intended, but overly broad — expanded the federal government�s footprint in our lives and inadvertently left us more vulnerable to the next crisis.
Since the passage of the Dodd-Frank Act in 2010, regulators have promulgated thousands of pages of regulations, saddling America�s banks with compliance costs that have reduced the services they can offer and increased the fees they charge.
The average American now pays $118 per year in checking fees and the account balances needed to qualify for free-checking have tripled, from $250 to $750. As a result, approximately 1 million people � mainly low-income families � have joined the ranks of the unbanked.
Meanwhile, we continue to hear the stories of small banks having to hire more compliance officers than lending officers � and even buckling under the weight of new regulations.
According to FDIC data, since 2010, more than 2300 community banks have either closed or been forced to merge, at a rate of 60 per quarter � and 16 percent of our remaining community banks have stopped or plan to stop making mortgages as a result of Dodd-Frank. Fewer banks means diminished access to capital � the capital needed to launch a new business, expand an existing business, or buy a home.
It is no coincidence that economic growth has been an anemic 2.2 percent since 2010 � the worst post-recession recovery on record. A return to the healthy growth rate of 3.5 percent annually that the U.S. economy enjoyed for a half a century following World War II would mean more jobs, more opportunity, and higher wages.
That�s why House Republicans, led by Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, on which I�m proud to serve, have introduced the Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs (CHOICE) Act.
This common sense alternative to Dodd-Frank represents a fundamental break from the overregulation and micro-management of banks by Washington bureaucrats in favor of strong capital and the freedom to serve the financial needs of American households and businesses.
The CHOICE Act rests on the following sound principles:
· Every American must be afforded the opportunity to achieve financial independence.
· Consumers must be protected from financial fraud, but also from the loss of economic liberty.
· Taxpayer bailouts of financial institutions must end and no company must ever be considered too-big-to-fail.
· Economic growth for all must be revitalized through competitive, transparent, and innovative capital markets.
· Simplicity must replace complexity, because complexity can be gamed by the well-connected or abused by the powerful.
· Both Wall Street and Washington must be held accountable, and the financial futures of Americans should not be subject to the political environment.
Pursuant to these basic principles, the CHOICE Act�s foundation is the understanding that plentiful bank capital is the cornerstone of a strong, healthy, and resilient financial system ready to effectively and reliably fuel the financial needs of a robust economy.
The CHOICE Act offers the nation�s banks a choice: in exchange for holding capital amounting to at least 10 percent of their total assets � a ratio significantly higher than what is currently required � banks would be exempted from the Dodd-Frank regulatory regime as well as a number of other regulatory burdens that pre-date Dodd-Frank.
To avail themselves of the CHOICE option, most big banks would have to raise a significant amount of capital. Community banks, by contrast, are already generally well-capitalized and would have to raise little to no capital in order to shed constricting regulations.
The financial system is the economy�s cardiovascular system, circulating the lifeblood of capital and credit to our businesses and families.
To achieve the rates of economic growth that hard-working American families need and deserve, we need a financial system that is strong, resilient, and innovative.
The CHOICE Act will bring us closer to that goal.
Congresswoman Love represents Utah’s 4th District.
The economic downturn in 2008 cost Michiganians their jobs, families their savings, and some even their homes. In response to this seismic event, Democrats in Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law. According to its supporters, Dodd-Frank was a panacea of regulatory solutions that would end “too big to fail” and prevent a future financial crisis.
In reality, Dodd-Frank has made it even more difficult for struggling families across Michigan to secure a future for themselves and for their children.
First, Dodd-Frank did not end the notion that certain banks are “too big to fail.” Instead, it enshrined it. Today, hardworking taxpayers continue to be on the hook for Wall Street�s poor business decisions thanks to Dodd-Frank�s bailout fund. Secondly, since Dodd-Frank was enacted, the largest banks are even bigger while the small banks are fewer. Community financial institutions that had nothing to do with the crisis are being strangled by overly burdensome regulations that were intended for massive banks. But we need our community and midsize regional financial institutions to be able to lend to consumers and small businesses so they can innovate, invest and create jobs.
To restore economic opportunity to hardworking families, I am working with my colleagues on the financial services committee to introduce the Financial CHOICE Act. This commonsense legislation will protect consumers by restoring accountability, ending taxpayer bailouts, and providing regulatory relief for community financial institutions.
At the center of this legislation is accountability. It requires strong capitalization standards for banks and imposes the toughest penalties in history to protect consumers from financial fraud. The Financial CHOICE Act also holds Washington bureaucrats accountable to the American people by placing the regulators themselves under Congressional Appropriations.
Since Dodd-Frank passed in 2010, big banks have gotten bigger and small banks have disappeared at an alarming rate. The Financial CHOICE Act protects taxpayers by eliminating “too big to fail” labels once and for all. Instead, we repeal this self-fulfilling prophecy and require failing institutions to liquidate through a streamlined bankruptcy without depending on taxpayer dollars.
Dodd-Frank created a one-size fits all regulatory structure that treats community banks the same as Wall Street Banks. Unlike some of the largest banks, community financial institutions across Michigan can�t afford to hire hundreds of lawyers and compliance officers to sort through Dodd-Frank�s red tape. These regulatory costs are passed on to consumers in the form of increased fees, fewer products and services, and more limited credit options. The Financial CHOICE Act eliminates this one-size-fits-all regulation by providing commonsense relief that allows community banks and credit unions to utilize their resources for lending and meeting the needs of their customers.
This bill will protect taxpayers and consumers from anti-growth Dodd-Frank regulations, and help hardworking Michiganians achieve financial independence.
Rep. Bill Huizenga, R-Holland, represents Michigan�s 2nd Congressional district, and chairs the House Financial Services� Subcommittee on Capital Markets, Securities & Investment.
LINK to original story in The Detroit News