| Rep. Jed Hensarling
Texas Republican Representative Jed Hensarling is the chairman of the powerful House Financial Services Committee. Part of its jurisdiction is insurance and banking. He wants to tear up the Dodd-Frank Act and calls the Obama administration-based rules based on “
faulty principle, faulty premise and faulty policy.” So he’s looking at changes that will dismantle the law that was the centerpiece of the president’s banking-caused recession solution.
“Simply put, Dodd-Frank has failed. It’s time for a new legislative paradigm in banking and capital markets,” Hensarling stated.
Here’s some of what Hensarling wants to do:
• Curtail the authority of the Consumer Financial Protection Bureau via regulation and budget changes.
• Change from a bureau to a commission and it will have a five-member board rather than a single regulator at the helm.
• Roll back the Volcker restrictions on banks using their own money to trade.
• Strip regulators from the authority to impose tougher capital and liquidity standards on those firms deemed too-big-to-fail.
• Any bank with a simple capital leverage ratio of 10% or more, and an all clear from regulators can declare itself free of the regulatory burdens and regulators of Basel III.
• It contains provisions to force regulators to conduct a cost-benefit analysis for any proposed rules or rule changes.
• It increases penalties for financial crimes.
His replacement plan is called the Financial Choice Act.
Hesarling calls the less than 1% growth for the first quarter pathetic. “We remain stuck in the slowest and weakest economic recovery in our history. One of the principal reasons is the Dodd-Frank Act, a grave mistake Washington foisted upon the American people nearly six years ago,” he said.
The congressman says his plan will “relieve financial institutions from regulations that create more burden than benefit in exchange for meeting higher, yet simple, capital requirements. Our reform plan allows banks to opt-in to an alternative regime that replaces growth-strangling regulation with reliable accountability. It stops investors from betting with taxpayer money. Think of it as a market-based, equity financed Dodd-Frank off-ramp.”
Few see this actually passing Congress. But Hensarling has introduced it anyway and in hopes it’ll open discussion to changing Dodd-Frank. “We believe that we need a banking system that has a federal safety net that has a whole lot more capital and a whole lot less federal control,” Hensarling said.
None of this sat well with Democrats and especially Massachusetts Sen. Elizabeth Warren. She was a strong advocate of the Consumer Financial Protection Bureau and doesn’t think Dodd-Frank went far enough with it. “We’ve only seen a summary of the bill so far, but even from that, it’s clear that Congressman Hensarling and his fellow Republicans think that the poor Wall Street banks have suffered too much under the new rules, and it’s time for them to return to the good old days before the 2008 crisis, when these banks could run wild,” she said.
Warren calls the proposal a “wet kiss” to Wall Street banks.
Ohio Rep. Sherrod Brown is the ranking Democrat on Hensarling’s committee. He’s totally against the idea and said Hensarling’s plan “underscores the collective amnesia of many in Congress and on Wall Street about how devastating the financial crisis was for an entire generation of working and middle-class Americans.”
Rep. Maxine Brown of California is also on the committee. She’s very concerned about the reduction in the power of the Consumer Financial Protection Bureau. Waters said this “immediately takes two steps backward by eliminating any oversight of the riskiest activities at banks and nonbanks by dismantling the Financial Stability Oversight Council and subjecting bank regulators to the appropriations process.”
The White House also spoke out. Press Secretary Josh Earnest said the bill “will allow big banks to go back making risky bets and put taxpayers on the hook once again for bailing out those banks to prevent a second Great Depression. That doesn’t make any sense.”
Banks — on the other hand — are interested. James Ballentine who is with the American Bankers Association (ABA) said improvement in Dodd-Frank is needed but he wants to see the details. “We really need to see the language on this bill. From the outline, there are several proposals, particularly in the regulatory relief area for community banks, that we’ve advocated for quite some time,” he said.
Source links: FastFT, New York Times, CNBC, Insurance Journal