ICYMI: Criticism of GOP Wall Street Deregulation Plan Mounts

WASHINGTON, D.C. - As details continue to emerge of House Republicans’ plan to gut the Dodd-Frank Act, criticisms of that proposal are mounting:

Republicans cook up plan to cripple consumer agency, Los Angeles Times

If there’s one thing the financial services industry hates, it’s adult supervision.

Last week, Rep. Jeb Hensarling, a Texas Republican who serves as chairman of the House Financial Services Committee, unveiled a plan that he said would rectify the “grave mistake” that was the 2010 Dodd-Frank Act, which tightened the regulatory screws on financial firms and created the Consumer Financial Protection Bureau as an industry watchdog.

… But there’s no disputing the success of the CFPB. Since its founding in 2010, the bureau has secured more than $11 billion in relief for more than 25 million consumers harmed by dubious financial practices. In other words, it made financial firms behave responsibly, in a grown-up fashion. The industry clearly would prefer to go back to the way things were before.

A flawed Dodd-Frank fix, The Washington Post

The House GOP has just unveiled its alternative to Dodd-Frank … the outline serves up much old Republican wine in a new election-year bottle: Rein in the Consumer Financial Protection Bureau, protect the securities industry’s ability to steer legal challenges into arbitration, and grant regulatory relief to community banks of the kind that abound in Mr. Hensarling’s home state and elsewhere in Red America.

… expect more legislative efforts to fix the six-year-old law, even the parts that aren’t broken.

If Banks Were Stronger, Regulations Could Be Simpler: Editorial, Bloomberg

The Financial Choice Act includes plenty of bad ideas -- such as killing an initiative to improve financial data and ending special oversight of systemically important institutions…

Hensarling proposes that any bank with at least $1 in equity for each $10 in assets -- a 10 percent leverage ratio -- should be freed from most other regulations, including rules aimed at ensuring that they have enough easy-to-sell assets on hand to survive a panic. That’s too adventurous. Research and experience suggest that more equity than this is needed to avoid distress in a severe crisis. And even a well-capitalized bank can fail if, for example, it lacks the liquidity to pay creditors on time.

Hensarling Plan Would Dramatically Weaken Financial Regulation, Americans for Financial Reform

Most Americans approve of the reforms in Dodd-Frank and want to see financial regulation made tougher, not weaker … In addition to repealing many of the reform measures adopted in response to the financial crisis of 2008, Hensarling would burden regulators with a series of crushing new procedural duties that would massively increase the difficulty of enforcing the rules his plan theoretically leaves intact.

… In short, this plan doesn’t get tough on banks; it gets tough on the regulators policing them. It would dramatically weaken their ability to do their jobs, and make it correspondingly easier for Wall Street banks, shadow banks, and lending companies to profit by ripping off consumers and engaging in reckless and dangerous short term speculation, rather than by providing loans, capital, and financial services on fair and transparent terms.

Missing an Historic Opportunity, Hensarling’s Plan is a Dream for Wall Street and a Nightmare for Main Street, Better Markets

This is a huge missed opportunity for Chairman Hensarling and the Republicans… He should have rejected the Wall Street wish list and focused on meaningful levels of real equity capital, but 10% is far too little and the trade-offs that gut so many other essential protections are totally unwarranted. To seriously protect Main Street and to genuinely put investors ‘in front of hardworking taxpayers,’ he should have proposed that Wall Street’s biggest financial firms fund themselves with at least 25% of real equity capital. That would have begun a serious bipartisan discussion about how Wall Street’s biggest, most dangerous financial firms should be regulated.

Hensarling’s Plan to Deregulate Wall Street Would Bring Disaster, Public Citizen

Apparently, Hensarling believes Wall Street needs more ways to block new reforms in the courts and in Congress. The truth is that regulators have been under siege by Wall Street at every turn, and the proof is in the glacially slow pace of rulemaking authorized, and in some cases ordered, by Dodd-Frank. But that appears to be too fast for Hensarling, whose bill would make the financial rulemaking process even longer and more prone to being gamed by Wall Street.

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