The Financial Choice Act would strip the agency of its ability to closely monitor financial firms for compliance with consumer protection laws and specifically prohibits the bureau from writing any regulations on payday and car-title loans.
President Trump said during the campaign that he wanted to dismantle Dodd-Frank. In February, he directed Treasury Secretary Steven Mnuchin to consult with regulators about changes to the law and to report back by this month. House Republican leaders decided not to wait. They pushed forward with a revised version of legislation introduced last year by Hensarling, chairman of the House Financial Services Committee. Maxine Waters D-Los Angeles , who has led opposition to the bill.
Republicans in the Senate are working on their own financial regulatory bill that could gain the needed Democratic support. They said the legislation was needed because Dodd-Frank rules had made mortgages tougher to obtain, forced banks to scale back fees that had helped allow them to offer free checking accounts, and placed a heavy burden on community banks. Gwen Moore D-Wis. Democrats said that bank profits are up and lending has increased since Dodd-Frank was enacted.
Republicans point out that the number of banks have declined under Dodd-Frank. Congress settled on a small provision regarding the right to freeze credit reports without cost, while also providing Equifax and the other bureaus a major victory by limiting their liability for certain lawsuits regarding credit monitoring services they provided.
In financial regulation, scandals are often the drivers of legislation to fix problems both exposed from the scandal and long festering. This bill does neither for credit reporting agencies nor for other recent financial scandals, such as the Wells Fargo fake account scandal. The failure of the Republican Congress to alter significantly Dodd-Frank does not mean that it will remain effective.
Finally, it is important to note that even for those who disagree with many provisions of the new law, there are some that are positive. The law changes a definition by the Federal Reserve on the treatment of certain municipal debt to allow it to count for a regulatory requirement for greater liquidity.
It also creates a reasonable parity with the treatment of corporate debt, striking a better balance for the financial system and ultimately allocating more capital to municipal governments. Hopefully they will use to build more infrastructure as it has become clear that is another campaign promise that Trump will not fulfill this year.
Report Produced by Center on Regulation and Markets. False narratives: 1. The bill repeals and replaced Dodd Frank. Major new lending is coming to individuals and small businesses. Financial crises always cause job losses, not just in finance but across the whole economy. Unsurprisingly, the people who suffer the most are those without a college degree. Politicians should really question why these people with fewer job opportunities should suffer because of crises caused by more highly educated people in finance, who have more ease in finding another job when they cause markets to implode.
And I believe that strengthening the Commodity Futures Trading Commission and working to stop banks' abuses of derivative end-users has been a very positive development. If Republican legislators want to talk about an area of finance that is being hard hit, they should focus on community banks. Mistargeted and expensive regulation ultimately leads to reduced growth and reduced employment. At a hearing to discuss the Financial Choice Act, the proposed bill to replace Dodd-Frank, a number of Republicans state that there was a huge rush to sign-off on Dodd-Frank before Financial Inquiry Commission had released a study about the causes of the financial crisis.
If they truly believe this, are they not guilty of the same rush to sign off on the Financial Choice Act without the data to back up their claims that this new act will help grow the American economy? Banks small and big have spent millions in auditors, compliance and new technology to adapt to Dodd-Frank —how much will they have to spend now to adapt to a new law?
Republicans often cite that numerous community banks have closed down since the year that Dodd-Frank was signed. Yet, it is difficult to quantify how much was due to new regulations and how much was due to the effect of the crisis on the banks' customers. Paul Merski of the Independent Community Bankers of America, which represents the interests of smaller banks, said: "It's a good start to putting a comprehensive reform bill on the table and it's very aggressive, so it really sets the high-water mark for what can be done for regulatory relief.
The main target of the Financial Choice Act is the rules introduced after the financial crisis known as the Dodd-Frank Act. Supporters say Dodd-Frank has made the financial system safer, increasing protections for consumers, improving stress tests and forcing large financial institutions to hold more money for use in the event of a financial shock. But opponents, which include community banks and other financial institutions, say it created an overly complex set-up that has inhibited growth, particularly for small businesses.
The bill, which has White House support, would abolish bailout authority and weaken the Consumer Financial Protection Bureau, the agency that has pursued banks and other firms for wrongdoing during the crisis. But the proposal goes farther than just repealing Dodd-Frank.
For example, it would require shareholders to have a bigger stake in a company to propose changes, and abolish a new rule that requires financial advisers to act in the best interests of their clients.
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