Hensarling on Dodd-Frank’s 4th Anniversary
July 23, 2014 -
“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.”
WASHINGTON- House Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee hearing to examine the Dodd-Frank Act on its 4th anniversary:
Dodd-Frank has always been based on upon a false premise that somehow deregulation or lack of regulation led us into the crisis. However in the decade leading up to the crisis, studies have shown that the regulatory burden on the financial services industry actually increased. There were few industries that were more-highly regulated; FDICIA, FIRREA, Sarbanes-Oxley, the list goes on.
We hear a lot about Wall Street greed; I could not agree more. I’m just curious, at what point was there not greed on Wall Street? So I’m wondering how that could necessarily be the determining factor?
What I do know is that affordable housing goals of Fannie and Freddie on steroids and other policies helped incent, cajole, and mandate financial institutions into loaning money to people to buy homes they ultimately could not afford to keep them. My Democratic colleagues at the time said “let’s roll the dice” on housing. They did, and the economy imploded.
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.
Now frequently in Washington, and I say frequently, regrettably, it is the rule as opposed to the exception, laws are always evaluated by their advertised benefits; not by their actual benefits or actual costs. 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.
Again, increasing entrepreneurship? I don’t think so.
Ending too big to fail? We’ve had this debate before. We had it yesterday, we will have it today, we will have it tomorrow. Dodd-Frank codified too big to fail into law, and it is now demonstrable four years later that the big banks have gotten bigger and the small banks have gotten fewer.
Financial stability? I suppose that is a debatable proposition. Financial stability is now defined by the unelected and unaccountable bureaucrats. I don’t know with the increased concentration though in our larger financial institutions whether one can say we have achieved financial stability. But what I do know is it comes at an incredible cost.
Thanks to the Dodd-Frank, it is now harder for low and moderate-income Americans to buy a home.
Again, thanks to Dodd-Frank, there are fewer community banks serving the needs of small businesses and families.
Thanks to Dodd-Frank, Main Street businesses and farmers face higher costs in managing their risk and producing their products, which is impacting every single American at their kitchen table.
Thanks to Dodd-Frank’s Volcker rule, our capital markets are less liquid than before, making it more expensive for companies to raise working capital which harms Americans saving for retirement and children’s’ education.
Thanks to Dodd-Frank, services that bank customers once took for granted like free checking are being curtailed or eliminated.
It is one of the reasons that 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.
By the time this Congress is over, the House Financial Services Committee would have addressed Dodd-Frank’s greatest sin of omission, housing finance reform. And working alongside our friends at the Judiciary Committee, who are developing a bankruptcy alternative to the Orderly Liquidation Authority. Before the end of this Congress, we will have also addressed Dodd-Frank’s greatest sin of co-mission, codifying too big to fail and taxpayer-backed bailout funds.