In opening remarks during a Financial Services Committee hearing today, Congresswoman Maxine Waters (D-CA), the Committee’s Ranking Member, denounced Republicans’ deregulatory agenda that puts the needs of special interests above working Americans.
Waters noted that Chairman Hensarling’s legislation, the “Wrong Choice Act,” to gut Dodd-Frank would make “radical changes to our financial regulatory framework that would harm consumers and the greater economy.” This would include giving banks a “hall pass” from Wall Street Reform if they achieve a 10 percent capital ratio – a provision in the legislation that Waters noted is far weaker than credible financial experts have proposed.
“Instead of spending so much time and energy trying to repeal Dodd-Frank, we should be building on its reforms and ensuring that our regulators can implement them effectively,” Waters said.
Full text of the statement, as prepared for delivery, is below:
Thank you, Mr. Chairman.
Since the passage of Dodd-Frank, we have seen piecemeal attempts by our colleagues on the other side of the aisle aimed at undercutting Wall Street Reform. Whether through legislation in this Committee, or “budget riders” on the House floor, or through endless, meritless “investigations,” there has been a drumbeat of efforts aimed at weakening the rules we put forward in response to the worst financial crisis since the Great Depression. This is all part of a massive deregulatory agenda, not to “Make America Great,” but to put the needs of special interests above those of working Americans and leave taxpayers footing the bill.
The legislation we will consider today – the Wrong Choice Act – is the centerpiece of this deregulatory agenda and is the culmination of six years of Republican efforts to gut financial reform. It recycles every bad idea this Committee has ever generated, adds a few more bad ideas on top, and creates an omnibus of special interest giveaways that invites the next financial crisis.
The hearing convened today is especially focused on Title One of the Wrong Choice Act, which gives banks a “hall pass” from Wall Street Reform if they achieve a 10 percent capital ratio.
Let me be clear – this idea is not serious.
While credible financial reformers have proposed strengthening capital requirements in exchange for some regulatory relief for community banks, the Wrong Choice Act is not that bill. In fact, it takes the names of true financial experts in vain, by stealing their ideas and weakening them. It then tries to rebrand these weak ideas as “reform.” Namely, the Wrong Choice Act contains none of the guardrails of other proposals, including limits on banks’ derivatives activity. It has no caps on bank mergers, meaning big banks will only get bigger. And the capital standards in this bill are far weaker than those proposed in bipartisan Senate legislation, which itself doesn’t also repeal Dodd-Frank, as this bill does.
It’s why Governor Tarullo of the Federal Reserve, when asked about this legislation, said it would, “incentivize banks to move toward much riskier assets,” and that capital levels “would have to be substantially higher to have regulators comfortable.”
What’s more, this bill makes other radical changes to our financial regulatory framework that would harm consumers and the greater economy. By repealing the “living wills” requirement, it does nothing to shrink mega-firms or ensure they could be resolved if they failed. And while the bill claims to end taxpayer bailouts, it would actually put us right back to where we were in 2008, when the largest banks had an implicit taxpayer guarantee.
The list goes on. The legislation would repeal the Volcker Rule, which prevents banks from gambling with taxpayer money. It would repeal the Financial Stability Oversight Council’s ability to designate our largest non-bank firms, like AIG, for heightened regulation. And it would all but gut the enforcement authority of the Securities and Exchange Commission.
And importantly, the bill would make it nearly impossible for the Consumer Financial Protection Bureau to actually protect borrowers from financial abuse. Indeed, by turning the Bureau into a partisan, gridlocked Commission, eliminating its independent funding, and bogging it down in onerous cost-benefit analysis, it would render the CFPB totally toothless and unable to protect consumers from predatory mortgages, payday lending, discriminatory automobile financing, forced arbitration contracts, or other harmful products and practices.
To me, this does not make good sense. When we have an agency that has returned $11.4 billion to 25 million consumers in five short years, why would anyone want to hamstring its work in this way?
So, it’s clear to me that this bill is the Wrong Choice for consumers, for investors, and for the entire financial system.
Instead of spending so much time and energy trying to repeal Dodd-Frank, we should be building on its reforms and ensuring that our regulators can implement them effectively. That is the work this Committee should be focused on.
So, I have to make sure that we all understand that this markup is a distraction from the more pressing issues we have at stake in this Committee – whether it’s the future of Wall Street reform or the crushing poverty faced by too many of our fellow Americans.