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Ranking Member Waters Responds to Dodd-Frank “Alternative”

Chairman’s Proposal Would Weaken Financial System, Harm Consumers

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Washington, DC, March 15, 2016 | comments

Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, released the following statement in response to the Committee Chairman’s dangerous plan to roll back the Wall Street Reform and Consumer Protection Act:

“This is just another attempt by the majority to gut administration policies that have helped millions of Americans. The Dodd-Frank law was enacted on the heels of the worst financial crisis our generation has seen. In the five-plus years since, our financial system is safer, fairer and stronger. We can always do more to improve our economy, but we shouldn’t give a handout to big banks that helped cause the crisis in the first place. Instead, we should focus on the communities that haven’t fully benefitted from the recovery and close the wealth gap among middle- and low-income households and minorities.

“Taking away consumer protections isn’t bold, it’s cowardly and won’t make Americans or the financial system any safer or better. Instead of focusing on the real issues facing America’s consumers and making the financial markets safer, the Chairman proposes a reckless plan to tear down financial reform and to have Americans fend for themselves. The Chairman thinks the crisis was caused by irresponsible consumers and not irresponsible banks, and now he wants to punish consumers by eliminating the agency designed specifically to protect them.

“Any plan that repeals the heart of Dodd Frank is a futile exercise that could jumpstart another financial crisis.”

A 2015 Democratic Staff Report on the fifth anniversary of Dodd-Frank highlighted the key accomplishments of the law:

Increasing Protections for Consumers

  • Dodd-Frank created the Consumer Financial Protection Bureau (CFPB), a federal consumer watchdog that has returned $11.2 billion to over 25.5 million consumers who have fallen victim of unfair and deceptive financial practices.
  • The CFPB has established a qualified mortgage rule, ensuring that borrowers actually have the ability to repay the loan, and has established new rules-of-the-road for mortgage servicers. It is also taking action against payday lenders and other predators in our financial system.
  • The Bureau has worked with the Department of Defense to develop financial protections for service members and veterans, and established a national database to aid consumers with complaints about debt collectors, credit card companies, and credit rating agencies, among others.

Identifying and Mitigating Systemic Risk

  • Dodd-Frank created the Financial Stability Oversight Council (FSOC), which identifies and responds to emerging threats to stability in our financial system. FSOC is monitoring our nation’s biggest banks and has designated four non-bank firms for heightened supervision.

  • 2,700 private fund advisors have registered with the Securities and Exchange Commission (SEC) and begun reporting information on approximately 8,000 hedge funds, 70 liquidity funds, and 7,000 private equity funds.

Preventing Future Bailouts

  • Regulators have finalized the “Volcker rule,” which has forced banks to limit their risky trading practices, and refocused them on making investments in the real economy.
  • Dodd-Frank has required banks and regulators to take steps that ensure a failing financial institution never again threatens the financial stability of the U.S. These include requiring the biggest banks produce “living wills,” undergo stress tests, and be subject to heightened capital standards.

Creating Transparency and Oversight of Derivatives

  • Dodd-Frank has brought increased transparency to the once risky and opaque derivatives market, by requiring participants to register with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission.

  • As a result, about 75 percent of the transactions in the swaps market are “cleared,” which standardizes trades, increases transparency and reduces risk. In December 2007, only 15 percent of transactions were cleared.

Providing Shareholders with a “Say-on-Pay” and Greater Accountability to Shareholders

  • To date 1,574 Russell 3000 companies have conducted Say-on-Pay votes, which allow shareholders to approve or disapprove increases in executive compensation packages. As of July 2015, 32, or 2 percent of Russell 3000 companies, have failed to hold a say-on-pay vote.

Providing new enforcement and regulatory authority to the Securities and Exchange Commission (SEC)

  •  One of Wall Street’s top cops, the SEC has recovered more than $3.6 billion in penalties and other enforcement actions against misconduct that led to or arose from the financial crisis. It has also established an Office of the Whistleblower at SEC, to aid them in policing violators, which just last year received more than 3,600 tips (or about 10 per day) covering a variety of securities laws violations.

 

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