At a hearing to discuss the Dodd-Frank Wall Street Reform Act's increased capital and liquidity requirements for the nation's biggest banks, Congresswoman Maxine Waters (D-CA), Ranking Member of Financial Services Committee, strongly rebuked critics by showing how these requirements have effectively stabilized and strengthened financial markets.
The top Democrat pointed to reports of record profits for banks and increases in lending as clear signals that Dodd-Frank has made our financial system stronger, safer and more resilient than ever before.
Waters referred to a Financial Services Committee staff report released earlier this week which found that despite fierce opposition from opponents of the law, Dodd-Frank has empowered regulators with tools to prevent another crisis. And today, the American economy has rebounded, adding 12.8 million jobs over 64 months of consecutive growth and cutting the unemployment rate in half since the depths of the crisis.
Full text of the opening statement follows:
“Thank you, Mr. Chairman.
Over the years, as this Committee has debated, passed and overseen the implementation of the Dodd-Frank Wall Street Reform Act – we’ve heard a number of doomsday scenarios about the consequences of new liquidity and capital requirements for financial institutions.
Well, as we celebrate the five-year anniversary of Dodd-Frank – and as these requirements have gone into effect – I’m pleased to report that the world hasn’t ended. Today, our financial markets are stable and secure. Banks are making record profits, lending is up, and we have a financial system that is stronger, safer and more resilient than ever before.
Prior to the financial crisis, regulators were asleep at the switch – as banks leveraged up and concentrated their activities in risky mortgages while being allowed to rely on their own risk models. Bank executives made huge bonuses on these short term gains, but when the music stopped it was taxpayers who took the losses.
Dodd-Frank mandates that regulators work together to closely monitor the nation’s large banks, setting a floor for capital and liquidity standards to ensure financial companies are risking their own capital, rather than taxpayer money. Just this week, regulators finalized a rule that will require even higher capital standards at the largest, globally systemic banks that actively seek out the riskiest lines of business.
While the implementation of Dodd-Frank is incomplete, it’s already working. A staff report committee Democrats released this week found that Dodd Frank has made our financial system more transparent, more stable and more accountable by arming our regulators with vital tools to monitor the financial system for risks, increase transparency and institute new investor protections.
And to make certain this approach is not overly onerous, Dodd-Frank has created a flexible and tiered regulatory framework, to ensure these heightened standards are tailored to banks of different sizes.
Since the passage of Wall Street Reform, the American economy has stabilized, adding around 12.8 million private sector jobs over 64 consecutive months of job growth, dropping the unemployment rate from its peak of 10 percent in 2009 down to 5.3 percent currently.
Mr. Chairman, when discussing the proper role of capital and liquidity, it’s important to keep in mind that today our financial system is safer and stronger that it has been in a generation – regardless of the claims we hear from its most fervent opponents.