June 7, 2017
This week, the U.S. House of Representatives will pass the Financial CHOICE Act. It will eliminate the idea of “too big to fail,” which actually meant “too small to grow.” It will provide regulatory relief to the financial services industry by rolling back unnecessary government intrusion into our financial system. This result is that American consumers and small businesses will have more access to capital. This will, in turn, create jobs.
During the 2007 housing crisis that disabled the American economy and caused the Great Recession, Congress authorized trillions of dollars of new spending to prop up the economy and bailout large banks that had made risky investments. Rather than letting the market react and guide banking practices going forward, Democrats pushed for regulations to the financial industry that they argued would prevent a similar crisis in the future. After President Obama’s election in 2008, the Democratic-led Congress went to work, and ultimately passed the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Dodd-Frank legislation produced over 400 new crippling regulations to the American financial sector, including more than five times as many new restrictions as any other law passed since 2009. The result: the weakest economic recovery in 70 years. The legislation actually enshrined bailouts in permanent law, and created a lopsided system wherein big banks grew bigger while community banks and credits unions closed at an average of one per day. Because of Dodd-Frank, Americans face higher bank fees, more expensive mortgages, and the negative impacts of the Consumer Financial Protection Bureau (CFPB), one of the most powerful and least accountable agencies in our nation’s history.
Implementing Dodd-Frank has cost billions of dollars and the countless new regulations and restrictions have resulted in millions of hours of compliance work. In fact, the federal government alone has hired nearly 3,000 new full-time employees to enforce compliance to the onerous new regulations. The American economy will not fully recover until many of Dodd-Frank’s “reforms” are repealed.
Enter the CHOICE Act – Republicans’ alternative to these disastrous policies. The CHOICE Act truly ends the era of taxpayer-funded bailouts, repeals many onerous regulations, and ensures that no bank can be labeled “too big to fail.” It also sets tough penalties for Wall Street fraud and deception and reins in the administrative state to ensure that Congress, not unelected bureaucrats, have oversight of financial regulators.
The most important aspects of the CHOICE Act are reforms to the CFPB and regulatory relief for Main Street America. Democrats created the CFPB as an independent agency, accountable to no one – not even the president – regulating for consumer credit. A single, unelected bureaucrat was inappropriately given jurisdiction over regulating mortgages, credit cards, bank accounts, and consumer credit. An appellate court noted that, “…Indeed, other than the President, the Director of the CFPB is the single most powerful official in the entire United States Government, at least when measured in terms of unilateral power. That is not an overstatement.”
The CHOICE Act ends this frightening consolidation and abuse of bureaucratic power by limiting its role to enforcement of pre-existing consumer protection laws and providing oversight of the agency for Congress and the president. According to the American Action Forum, the CHOICE Act also “eliminates $10 billion in annual regulatory costs and saves 10.3 million hours of paperwork.” This, in large part, is why over 100 organizations and associations around the country, including the Arizona Bankers Association, strongly support the Financial CHOICE Act.