FSC Majority | Week in ReviewPosted by Staff on July 25, 2014
Committee Reviews the Dodd-Frank Act on its 4-year Anniversary
On Wednesday, the full committee held a hearing to assess the impact of the Dodd-Frank Act on America’s Main Street economy and hard-working American taxpayers on its 4th anniversary of being signed into law.
"It wasn’t deregulation; it was bad regulation that helped lead us into this crisis. So if you get the wrong diagnosis you get the wrong remedy. Dodd-Frank has been the wrong remedy, adding incomprehensible complexity to incomprehensible complexity," said Chairman Jeb Hensarling (R-TX). "So at the time Dodd-Frank was passed, we were told it would would 'lift the economy,' 'end too big to fail,' 'end bailouts,' 'increase financial stability' and 'increase investment and entrepreneurship.' And instead, what have we learned? We have learned that it is now official that we are in the slowest, weakest recovery in the history of the nation. Tens of millions of our countrymen now unemployed or underemployed. Negative economic growth in the last quarter. Business startups at a 20-year low. One out of seven dependent upon food stamps."
"The House Financial Services Committee has moved numerous regulatory relief bills, a number of which have actually passed with bipartisan support; none of which I recall being taken up by the Democratic Senate," added Chairman Hensarling.
Mr. Dale Wilson, a community banker from San Diego, Texas provided a first-hand account to the committee of how Dodd-Frank's "excessive regulation and government micro-management" has forced banks to consolidate due to the inability to "maintain profitability in an environment where the regulatory compliance costs are increasing between 50 and 200 percent."
"The real costs of the increased regulatory burden are being felt by small town borrowers and businesses that no longer have access to credit. When a small town loses its only bank, it loses its lifeblood. It's more difficult to improve schools, health care facilities, and other infrastructure projects. I know it was not the intent of Congress when it passed Dodd-Frank to harm community banks, but that is the awful reality," said Mr. Wilson.
Paul Kupiec, a former FDIC official and current Resident Scholar at the American Enterprise Institute, also testified at the hearing and debunked the myth asserted by Dodd-Franks supporters that Dodd-Frank ended “Too Big to Fail.”
“Ironically, Dodd-Frank’s heightened expectations of a government’s commitment to remove the possibility of a future financial crisis may increase the probability that such a crisis will occur and require government support for the largest financial institutions that have been identified as too-big-to-fail,” said Kupiec.
Subcommittee Examines the SEC's Division of Corporation Finance
On Thursday, the Capital Markets and Government Sponsored Enterprises Subcommittee held a hearing to examine the SEC's Division of Corporation Finance. This was the second in a series of SEC oversight hearings.
"It is unfortunate indeed that the SEC still does not embrace its mission to promote capital formation with as much zeal and enthusiasm as it does with Dodd-Frank. Our markets and economy are worse for it," said Subcommittee Chairman Scott Garrett (R-NJ).
"At a time when small businesses continue to struggle to raise capital and investors are having difficulty earning a return on their investment, the SEC should not harm small business job-creators or the investing public by reducing the amount of participants in this field eligible for private placement," added Chairman Garrett.
"The JOBS Act and numerous bipartisan bills that have passed out of this committee highlight the fact that the SEC needs to do more to promote capital formation through common sense updates to its regulations," said Rep. Robert Hurt (R-VA).
Rep. Patrick McHenry | Four years after Dodd-Frank fix, system still broken
Among the great indignities of the financial crisis: American families were footing the bill for the massive taxpayer-funded bailouts of Fannie Mae, Freddie Mac and other large financial institutions while struggling to scrape by in the broken economy. In 2009, Bloomberg estimated that the U.S. government and other federal agencies had committed nearly $13 trillion to support these failing institutions. The nearly $13 trillion represented 90% of the U.S. gross domestic product for 2008. In signing the law, Obama claimed that never again would the American people foot the bill for these large firms. Yet amazingly Dodd-Frank does not just fail to end these bailouts, it cements them into law and greatly increases the likelihood the American people will be stuck with the federal government's bailout tab again in the future.
Weekend Must Reads
Fox News | Derailing the American Dream since 2010: Thanks a lot, Dodd-Frank
Dodd-Frank and the rest of Washington over-regulation help explain why the U.S. economy today is $1.6 trillion smaller than what an average economic recovery over the last 50 years looks like. This lackluster performance explains why a family of four today is missing more than $1,100 in after-tax income and why there are nearly 6 million fewer jobs compared with the average recovery. The answer is less Dodd-Frank, less red tape and more free enterprise and economic freedom. Free enterprise has lifted more people out of poverty than all the government anti-poverty programs combined. It is the only economic system that frees ordinary people to achieve extraordinary results.
Citizens Against Government Waste | CAGW Names CFPB Director Richard Cordray July Porker of the Month
He singled out window replacement, plumbing and electrical upgrades, and a new roof as cost centers for the renovations, yet plans for the building also include such luxurious amenities as an indoor waterfall, a four-story glass staircase, a sunken garden, a custom “green” roof, and stools commissioned from world-renowned sculptor Maya Lin. The building, which is being rented, was accepted in “as is” condition by CFPB officials, and will not even house all of the CFPB’s staff. The renovation will cost approximately $590 per square foot, which is more than double the average cost for renovating some of Washington’s most high-end office buildings. According to the House Financial Services Committee, “…the CFPB is spending much more per square foot than it cost to build the Trump World Tower ($334/square foot), the Bellagio Hotel and Casino ($330/square foot) and the Burj Khalifa in Dubai ($450/square foot).” The latest estimated cost of $215.8 million is 37 percent greater than the value of the building, which was appraised at $157.3 million in 2011. House Financial Services Chairman Jeb Hensarling (R-Texas) has demanded that Director Cordray produce “full, unredacted” records related to the escalating costs for the building renovation by July 31, 2014.
Washington Times | At 4, Consumer Financial Protection Bureau is still unaccountable
The bureau's head, currently Richard Cordray, cannot be fired, no matter how poor his performance. He's armed with unlimited authority, enabling him to splurge on luxuries. He spent $216 million redecorating the bureau's headquarters with such amenities as a two-story waterfall and a glass staircase. The "consumer protection" bureau is now worth more per square foot than the Bellagio Hotel in Las Vegas or the opulent Burj Khalifa in Dubai, where a guest can sleep in a room designed by Giorgio Armani for $7,000 per night (if he can sleep at all after paying $7,000 for a place to sleep).
Investor's Business Daily | Four Years In, Dodd-Frank Hasn't Fixed Anything
"Ironically, Dodd-Frank's heightened expectations of a government commitment to remove the possibility of a future financial crisis may increase the probability that such a crisis will occur and require government support," former FDIC official Paul Kupiec, now with the American Enterprise Institute, testified this week. Meanwhile, nonbanks such as GE Capital, GMAC and other industrial finance companies came under the government's heavy regulatory hand for the first time ever. New agencies like the Consumer Financial Protection Bureau, which now controls all consumer lending, and the Financial Stability Oversight Council, a super-regulatory board with sweeping powers and no direct accountability to Congress, have become a dead hand.
On the Horizon
July 29, 2014 10:00 a.m.
In the News
Wall Street Journal | House Republicans Take Aim at Dodd-Frank
Wall Street Journal | Dodd-Frank Law Still Far From Finished
Wall Street Journal | Four Years of Dodd-Frank Damage
American Banker | DOJ Memo Leaves No Doubt About Choke Point’s Motives
American Banker | In Year Four of Dodd-Frank, Over-Regulation Is Getting Old
Washington Times | MORICI: Yellen’s denials of rising inflation