The Top Ten Reasons to Pass the Financial CHOICE Act

by Iain Murray

It’s no secret that the Dodd-Frank Act did for Americans’ access to financial services what Obamacare did for their access to health insurance. In both cases, many Americans were left paying far more for services that were available to them much more affordably before the passage of the thousand-page bill.

Just as family after family found themselves with unaffordable health insurance deductibles, millions of Americans found themselves unable to afford fees imposed on Main Street banks that had nothing to do with the financial crisis. President Obama might as well have said, “If you like your bank account, you can keep it.”

Thankfully, relief appears to be on the horizon. The Financial CHOICE Act, which may be voted on in the House as early as Thursday, goes a long way toward fixing many — though, unfortunately, not all — of the problems created by Dodd-Frank.

Here are the top ten reasons why the House should pass it and send it to the Senate:

  1. It will provide a better solution to the too-big-to-fail problem by allowing for a new chapter in the bankruptcy code to replace the counterproductive “orderly liquidation authority” under Dodd-Frank. This provision has made big banks even more entrenched, and subjected non-bank financial institutions like insurance companies to inappropriate regulation.
  2. It will assist in capital formation by allowing banks to swap higher capital reserves for less stringent regulation, which will be a great boon to struggling smaller and mid-sized banks. Other measures will also assist in capital formation, such as the Helping Angels Lead Our Startups Act, that has been included in the bill.
  3. It will impose regulatory discipline on agencies by requiring them to conduct proper cost-benefit analysis of regulations, including retrospective review.
  4. It will make agencies more transparent and accountable by requiring them to submit proposals to international financial institutions to a notice-and-comment period beforehand.
  5. It will go some way to address the problem of excessive delegation of legislative authority from Congress to the executive by implementing the Regulations from the Executive in Need of Scrutiny (REINS) Act for financial regulations. REINS requires that major rules that cost $100 million annually or more be approved by the Congress. It reinforces this by amending the Administrative Procedure Act in instructing Courts to not give excess deference to agencies’ interpretations of statutes.
  6. It will repeal the Department of Labor’s Fiduciary Rule, a massive power grab by the Department that will stop middle income consumers from receiving investment advice tailored to their individual preferences and circumstances.
  7. It will finally subject the Consumer Financial Protection Bureau, a rogue agency among rogue agencies, to proper accountability. It will restructure it as the Consumer Law Enforcement Agency to be answerable to the President in his duty to faithfully execute the laws, make it accountable to Congress through the appropriations process, and curtail its immense discretion to regulate any industry it dislikes out of existence.
  8. Speaking of regulating politically incorrect industries to death, it will close the loopholes that allowed the abuses of Operation Choke Point.
  9. It will abolish the Office of Financial Research, which has such broad powers and such little accountability that Mark Calabria, Norbert Michel, and Hester Pierece concluded that it has “the potential to impose substantial pecuniary and privacy costs on the financial industry and the American public without clear benefits.”
  10. And finally, it will subject the Federal Reserve to a proper audit.

On top of all that, the bill will reduce the deficit by $25 billion, according to the Congressional Budget Office.

As Peter Wallison of the American Enterprise Institute says,

Dodd-Frank was based on the false idea that the 2008 financial crisis was caused by insufficient regulation of the private sector. This narrative supported what the 2010 Democratic Congress wanted to accomplish—the imposition of much greater regulation on the US financial system—but did not come close to identifying or addressing the government policies that were the actual cause of the crisis. Indeed, by absolving the government from any role in the crisis, the supporters of Dodd-Frank left the government free to do the same thing again—something that is occurring right before our eyes.

It is time to right the wrong of Dodd-Frank. It is time to pass the Financial CHOICE Act.

NB: An earlier version of this article erroneously said that the Office of Financial Research conducted bank stress tests. Although it has a role in evaluating stress tests, the Federal Reserve conducts the tests, which are misleading.

 

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