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Opposition to Chairman Hensarling’s ‘Wrong Choice Act’

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Washington, DC, August 1, 2016 | comments

Opposition to Chairman Hensarling’s “Wrong Choice Act” continues to mount:

From Advocacy Groups:

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.

Civil and Human Rights Coalition Decries House Bill to Gut the CFPB, The Leadership Conference on Civil and Human Rights

The bill … represents a failure to learn from the mistakes of the past and a stubborn insistence on making them all over again. It would eliminate the independence of the CFPB, leaving it at the mercy of high-powered financial services lobbyists and their allies in Congress, and less responsive to ordinary consumers. It would let payday lenders continue to make deceptive loans that trap consumers and milk them for as much as 400 percent a year in fees. And it would open the door to many new high-cost and deceptive practices in the future.

We sincerely hope that today’s hearing was the last we will hear of this profoundly misguided proposal.

Merchant Community Urges Congress To Protect Debit Swipe Fee Reform, NACS

The debit reforms contained in Dodd-Frank, also referred to as the “Durbin Amendment,” brought the first piece of competition and transparency into a market that was historically void of it.

The reforms in the law have benefitted American consumers, merchants, small financial institutions and the economy as a whole. Repealing or weakening the law will only benefit fewer than two percent of the country’s largest banks and remove any and all competition from the debit routing market.

Although [Jeb Hensarling has] recently spoken about his commitment to helping Main Street and ending government bailouts, a repeal of debit swipe fee reform would do the exact opposite.

In The News

All hail the CFPB: banking watchdog hangs in balance as election nears, The Guardian

Hensarling’s plan to repeal Dodd-Frank and replace it with a patchwork quilt of lightweight, bank-friendly rules, unveiled in June, would gut the CFPB. It would deprive the agency of the right to scrutinize some kinds of lending altogether (such as auto loans), and it would politicize the entire process. Right now, the CFPB is about as independent as any Wall Street agency can be: its head is appointed by the president and left to get on with his job, with independent funding received from the Federal Reserve.

If Hensarling gets his way, the CFPB would become completely accountable to Congress, having five commissioners appointed by party leaders, and having to fight for an annual budget. In other words, the same politicians who receive lobbying funds from Wall Street would be deciding who runs the agency that protects consumers from Wall Street – and how much money that agency should get. That hasn’t always worked out terribly well for the SEC, which has battled for its budget, and which is still waiting for the Senate to confirm two nominees to its five-member commission.

Wall Street strikes back: Our view, USA Today

[Dodd-Frank] requires major banks to maintain bigger buffers against downturns, refrain from running hedge fund-like trading desks, and produce “living wills” that can be used to liquidate them if they falter. The law also created the Consumer Financial Protection Bureau, the agency that polices the sometimes unsavory world of personal lending.

… So the big banks have done what they do: run to Congress, a very different one from the one that passed Dodd-Frank in 2010, to ask for help. Obliging House Republicans, having failed to repeal and replace Obamacare, are making a new bid to effectively repeal and replace Dodd-Frank.

… Given Wall Street’s deceptions and miscalculations in creating the financial crisis, it’s a wonder that anyone would think it needs regulatory relief.

… The banking industry's case is unlikely to carry the day, nor does it deserve to. The fact is, Dodd-Frank is a pretty good law. It may need to be simplified in some ways and strengthened in others. But it does not need to be repealed or replaced.

How Rep. Hensarling’s plan will strip Wall Street oversight, Dallas Morning News

Last week, Chairman Hensarling unveiled a plan to repeal and replace the Dodd-Frank reforms enacted after the financial disaster of 2008. Most Americans, Republicans as well as Democrats, supported those reforms and would like to see financial regulation made tougher still. But Rep. Hensarling says he "will not rest – and my Republican colleagues on the House Financial Services Committee will not rest – until we toss Dodd-Frank onto the trash heap of history."

One part of Dodd-Frank he especially dislikes is the Consumer Financial Protection Bureau. In its short life, this agency has taken steps to rid the mortgage market of loans designed to self-destruct; shielded military families against a variety financial scams; cracked down on abusive credit-card fees, illegal debt collection practices and discriminatory auto lending; and delivered more than $11 billion in relief to more than 25 million Americans cheated by financial companies big and small.


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.

Fed’s Tarullo Sees More Changes for Big Banks, Criticizes GOP Capital Proposal, Wall Street Journal 

[Tarullo] also threw cold water on a regulatory relief proposal from House Financial Services Committee Chairman Jeb Hensarling (R., Texas), dismissed calls for a broad study of financial sector rules, and said small community banks should face simpler capital rules.

“If that [10% leverage ratio] were the only requirement that were put in place, then banks would be incentivized to move toward much riskier assets because their capital requirements wouldn’t change… That 10% number would have to be substantially higher to have regulators comfortable that there were not substantial safety and soundness considerations,” Mr. Tarullo said. But he suggested that if regulators did adopt a higher leverage ratio, that might crimp the functioning of the economy.

Based On New Hensarling Bill, GOP Not Keen On SEC Fiduciary Rule After All, Investment News

Capitol Hill Republicans have said for years they wanted the Securities and Exchange Commission to proceed before the Labor Department in proposing a rule to raise investment advice standards. They bemoaned and tried to kill the DOL's rule, which applies only to retirement accounts. It was finalized in April — before the SEC even made a proposal. But if the House GOP gets its way, the SEC may be delayed even further before getting its own version out the door — raising a question about how much Republicans really want to see the SEC issue its own rule.

Swipe Fees and the ‘Trash Heap Of History,’ The Hill

Speaker Paul Ryan (R-Wis.) is determined to prevent politically toxic votes on the House floor. Rep. Jeb Hensarling (R-Texas) didn’t get the memo… His waste disposal project could create a political brownfield for vulnerable House Republicans.

More than 98 percent of banks and credit unions are exempt from the Fed's rule. Exempt institutions charge higher average debit card swipe fees than banks subject to the rule, according to studies by the Federal Trade Commission, the Government Accountability Office and the Federal Reserve banks of Kansas City and Philadelphia.

Repealing the Durbin amendment would thus not help local banks and credit unions. It would, however, harm local merchants.

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