Financial Regulatory Reform

In July 2010 Congress passed The Dodd-Frank Wall Street Reform and Consumer Protection Act, and President Obama signed the legislation into law on July 21, 2010.  While I support efforts to carefully examine our regulatory system, determine where and how it failed, and make the changes needed to ensure that these failures do not happen again, I remain concerned about a number of provisions in the legislation that dramatically increases the government’s role in industries beyond the financial industry. 

For example, I am concerned that the Consumer Financial Protection Bureau created by the Dodd-Frank Act has broad authorities that could dramatically impact the availability of credit for American consumers.  Rather than addressing the actual gaps in existing regulation and fixing them, the Dodd-Frank Act simply piles on another bureaucracy with no indication that this regulator will be any more effective than the old ones.  The Dodd Frank Act dramatically expands the role of government, including the authority of the Federal Reserve, and gives the government broad, undefined authority to regulate huge segments of the economy—including non-financial institutions that had nothing to do with causing the financial crisis.

I am also concerned that the Dodd-Frank Act puts taxpayers on the hook for firms that are determined to be “too big to fail.” While on paper large banks are responsible to pay for the winding down of firms whose failure is determined to cause systemic risk, bail outs will initially be funded by taxpayers, with no certainty that other firms will survive to pay them back.  I do not believe that the emergency actions taken by the government in 2008 should become the status quo for the way that the government handles the failure of private companies.

Lastly, I am deeply concerned that this law takes no steps to reform Fannie Mae and Freddie Mac, which are currently in government receivership and are continuing to lose taxpayers money.  Experts believe that the largest loss taxpayers will suffer from government intervention in the financial crisis will be from Freddie and Fannie, yet the bill fails to make any changes in the way that the housing GSEs operate.