Thursday, while we were watching the shiny Comey testimony, the Republican-led House of Representatives was capitalizing on our distraction fomenting another 2008-style financial crash.
House Republicans voted Thursday to pass the “Financial CHOICE Act” that begins the repeal process for Dodd-Frank, a consequential set of Wall Street regulations President Barack Obama signed into law to help prevent another crisis akin to what we experienced in 2008.
Following the economic downturn nine years ago, Congress created the Consumer Financial Protection Bureau (CFPB) out of Dodd-Frank to stop big banks’ ability to again wreak havoc on our economy. It protects American consumers from Wall Street avarice and abuse through the following steps:
- Supervising and enforcing action against big banks;
- Preventing unfair, deceptive, and abusive practices;
- Protecting against payday and car title lenders that charge sky-high interest rates; and
- Maintaining a public database of consumer complaints about financial firms.
“People believe there should be more — not less — regulation of Wall Street. They’re worried about regulators being too weak and being too afraid to take on the big guys. Not about their being tough.”
Yana Miles, senior legislative counsel for the Center for Responsible Lending, says about Thursday’s bill:
“The bill even specifically exempts payday and car title lenders — notorious for springing devastating debt traps for their already vulnerable customers — from any regulation.”
But banking industry lobbyists are overjoyed, claiming the CHOICE Act would bring relief to community banks, many of which claim Dodd-Frank’s regulations stifles.
“We are not seeking to roll back all of the policy response, all of Dodd-Frank. That’s not our intention. Our intention is to acknowledge what many regulators and legislators will tell you both publicly and privately, which is aspects of Dodd-Frank overshot.”
The “overshoot,” is something Federal Reserve Chair Janet Yellin has endorsed.
Former Rep. Barney Frank (D-Mass.)–the “Frank” in Dodd-Frank–agrees the restrictions on community banks is too much, but also believes the rubric used to identify “too big to fail” banks should be tougher.
“What you have are Republicans — including the chairman of the committee, Mr. [Rep. Jeb] Hensarling, who is a very honorable, very pleasant, deeply rigidly ideological conservative who is essentially against any regulation.”
Rep. Hensarling (R-Texas) is the sponsor of the nearly 600-page bill which would repeal the Volcker Rule, prohibiting banks from gambling with customers’ money; the fiduciary rule requiring retirement investment advisers to act in their clients’ best interest; and the Durbin Amendment limiting transaction fees merchants impose upon debit card issuers.
The Financial CHOICE Act will make acting forcefully against unlawful consumer market practices impossible, which would make it easier for predatory lenders, big banks, and other financial companies to take advantage of people.
This would open the floodgates to big banks that wish to accumulate higher fees while ignoring community banks the provision does not cover. The CHOICE Act would limit regulators’ ability to ensure banks are managing assets responsibly and possess adequate funds available to shoulder potential losses without turning to taxpayer bailouts. It would give Wall Street new capabilities to overturn rules, and make it harder for regulators to enforce remaining rules.
Rep. Hensarling told reporters Wednesday:
“Dodd-Frank represents the greatest regulatory burden on our economy, more so than all the other Obama-era regulations combined. There is a better way: economic growth for all; bank bailouts for none.”
Although Democrats acknowledge Dodd-Frank is imperfect, they oppose the CHOICE Act. Many see it as a harbinger for another economic downturn.
Rep. Maxine Waters (D-Calif.) is the top Democrat on the House Financial Services Committee. About the House bill, she said:
“The Wrong Choice Act is a vehicle for Donald Trump’s agenda to get rid of financial regulation and help out Wall Street. It’s an invitation for another Great Recession, or worse.”
Waters feels Republicans see their best chances to deregulate industry under President Donald Trump. She said:
“With the majority that they have in the House and the Senate and President Trump, this is their big opportunity to deregulate, deregulate, deregulate — and they’re going to go for it.”
The Financial CHOICE Act requires shareholders who wish to formally engage in the shareholder proposal process to own one percent of company stock. For Fortune 100 companies, shareholders would need to own an average of $1.2 billion in stock, with a range of $6 million to $7.7 billion. This would harm local and international communities since Wall Street would be free to wallow in corporate greed.
Featured image via YouTube video.