Today, the House Financial Services Committee held a hearing on the Republican plan to gut the Dodd-Frank Act. Committee Democrats and the Democratic witness, Georgetown University Law Professor Adam Levitin, explained how this plan would benefit special interests and expose us to another financial crisis.
“The Choice Act is a bad choice, is a recipe for financial disaster. It prioritizes ideologically driven positions over careful and serious policy analysis and reasoning, and the fate of the U.S. economy is too important to stake on an ideological gamble like the Choice Act,” Levitin said.
He added: “It encourages risky behavior by banks and condones sharp and discriminatory practices. It takes away key tools from regulators and ensures that they will be ineffective using their remaining tools because of political harassment and micromanagement. The inevitable result will be another financial crisis, but this time crisis resolution will be handled by a bankruptcy system that is simply incapable of performing the task assigned to it.”
In response to a question from Rep. Maxine Waters (D-CA), Ranking Member of the Financial Services Committee, about whether the effectiveness of the capital requirements in the bill are undercut by other provisions that would hamstring regulators, Levitin said: “It absolutely would. That’s why the choice offered in Title I of the Choice Act is so problematic; if it was a just a free-standing choice without the other provisions in the Choice Act, there would be a reasonable discussion to have about it. But when it is combined with all the other provisions in the Choice Act that basically render federal regulators completely ineffective, it becomes very dangerous, because then we are relying on nothing other than the banks’ own representation of what their capital is to protect us from a systemic crisis.”