Dump­ing Dodd-Frank

Congress has the op­por­tu­nity to cor­rect the con­se­quences of over­reg­u­la­tion

The Washington Times Daily - - EDITORIAL -

Re­ward­ing suc­cess and pun­ish­ing fail­ure is the best way to en­sure more of the first and less of the sec­ond. That’s com­mon sense, but Congress has a knack for spread­ing con­fu­sion. The Obama-era fi­nan­cial ser­vices law called Dod­dFrank was in­tended to pre­vent fi­nan­cial prac­tices that trig­gered the Great Re­ces­sion of 2008, but its moun­tains of reg­u­la­tions have picked the pock­ets of con­sumers rather than pro­tect­ing them. An op­por­tu­nity is at hand to re­store bal­ance be­tween free­dom and re­spon­si­bil­ity in the mar­ket­place.

The House is ex­pected to vote this week on the Fi­nan­cial Choice Act, a bill en­dorsed by the Fi­nan­cial Ser­vices Com­mit­tee last month in the usual party-line vote. The mea­sure would en­able the Se­cu­ri­ties and Ex­change Com­mis­sion to triple the penal­ties im­posed on com­pa­nies for fraud­u­lent prac­tices. It would take tax­pay­ers off the hook for bailouts, en­sur­ing that no com­pany is “too big to fail.” (The man­agers of such a com­pany might have been too big for their britches, how­ever.) In­stead of us­ing tax­payer money to re­place losses, in­sol­vent com­pa­nies would be sent into the bankruptcy courts. Rather than hit Amer­i­cans in the wal­let, the White House pre­dicts the leg­is­la­tion could save $35 bil­lion over 10 years.

Such a law would re­peal the so-called Chevron Doc­trine, which de­fers to fed­eral agen­cies in in­ter­pret­ing the rules they ad­min­is­ter. In the hands of am­bi­tious bu­reau­crats, the doc­trine has been a li­cense to ex­pand their do­main in ways that Rus­sia’s Vladimir Putin might envy.

The leg­is­la­tion would re­name Con­sumer Fi­nan­cial Pro­tec­tion Bureau the Con­sumer Law En­force­ment Agency and re­struc­ture its func­tion to in­clude pro­tec­tion of both con­sumers and com­pet­i­tive mar­kets and, sig­nif­i­cantly, rein cur­rent un­ac­count­abil­ity by plac­ing its bud­get un­der the Fed­eral Re­serve and mak­ing it eas­ier for the pres­i­dent to fire a rogue direc­tor. So far there’s noth­ing to over­turn Dodd-Frank’s cap on debit card swipe fees. The cap was meant as a money-sav­ing mea­sure for con­sumers, but banks, un­will­ing to swal­low losses, made them­selves whole by elim­i­nat­ing their pop­u­lar free check­ing fea­ture.

The bliz­zard of fed­eral reg­u­la­tions un­leashed by Demo­crat-backed pas­sage in 2010 of Dodd-Frank’s 2,300 pages put at a dis­ad­van­tage smaller fi­nan­cial in­sti­tu­tions like com­mu­nity banks, which rarely have the re­sources to cope with heav­ier bur­dens. The im­pact was telling: Com­mu­nity banks’ as­sets were halved from 1994 to 2015, ac­cord­ing to a Har­vard study. While the Great Re­ces­sion was rough on small banks, with 6 per­cent of them dis­ap­pear­ing, the study found that “since the sec­ond quar­ter of 2010 — around the time of the pas­sage of the Dodd-Frank Act — their share of U.S. com­mer­cial bank­ing as­sets has de­clined at a rate al­most dou­ble that be­tween the sec­ond quar­ters of 2006 and 2010.” Swing­ing their reg­u­la­tory club at Wall Street, Congress missed, and clob­bered Main Street.

The trig­gers for the Great Re­ces­sion with­out a doubt in­cluded mar­ket malfea­sance by fi­nan­cial in­sti­tu­tions that took on too much risk, and the ac­com­pa­ny­ing lax lend­ing prac­tices of quasi-gov­ern­ment lenders Fan­nie Mae and Fred­die Mac. Gov­ern­ment-man­dated af­ford­able hous­ing poli­cies in­sti­tuted in the 1970s also played a role.

Hard times call for ac­tion, but Dodd-Frank was too much of the wrong ac­tion. Congress can cor­rect course by re­peal­ing and re­plac­ing it with the Fi­nan­cial Choice Act.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.