While members of the House Financial Services Committee sparred on Tuesday over whether the Dodd-Frank Act is hurting more than it’s helping, representatives from various segments of the financial services community testifying before the committee stopped short of saying Dodd-Frank needs to be repealed.
When asked to raise their hand if they supported the repeal of Dodd-Frank, none of the seven testifying—representing groups including the Securities Industry and Financial Markets Association (SIFMA), the U.S. Chamber of Commerce and the Investment Company Institute (ICI)—did so.
Mitt Romney, the Republican presidential candidate, has pledged to repeal the law while saying some of its concepts “have a place.”
Granted, some of those testifying along with Republican members of the committee were glad to share their complaints about Dodd-Frank during the hearing, “The Impact of Dodd-Frank on Customers, Credit and Job Creators,” held by the Capital Markets Subcommittee.
Rep. Scott Garrett, R-N.J., chairman of the subcommittee, argued that the stagnant economy, the 8% unemployment rate, declining wages and frozen credit was “interrelated,” and that the passage of Dodd-Frank was “one of the main reasons why there has been such tepid economic growth since the financial crisis.”
But Democratic members of the committee were quick to defend the Wall Street reform bill. Rep. Brad Miller, D-N.C., said that by attempting to do away with provisions of Dodd-Frank, “my friends across the aisle” are “planting the seeds for the next financial crisis.” While admitting that Dodd-Frank “isn’t perfect,” Miller said that whatever effect the law has had on so-called job creators “pales in comparison to the $19.2 trillion in household wealth that was lost because of the 2008 financial crisis.”
Rep. Carolyn Maloney, D-N.Y., said that repealing Dodd-Frank would be the “height of irresponsibility,” as the law “brought huge swaths” of unregulated areas of the market under regulation. While admitting that Dodd-Frank needs “adjustments,” she argued that no one “wants to go back to unregulated” derivatives, for instance, which helped “lead to the worst economic crisis in my lifetime.”
Kenneth E. Bentsen, executive vice president of public policy and advocacy at SIFMA, told the lawmakers of the aspects of Dodd-Frank that SIFMA supports, which include the creation of a uniform fiduciary standard of care for brokers and advisors providing personalized investment advice, along with the establishment of a systemic risk regulator, the Financial Stability Oversight Council (FSOC), and the new Orderly Liquidation Authority intended to resolve failing systemically identified firms.
July 21 marks the second anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act being signed into law, and the House Financial Services Committee is planning to challenge its merits all month long. The second hearing will be held tomorrow by the Financial Institutions and Consumer Credit Subcommittee and is entitled “The Impact of Dodd-Frank’s Home Mortgage Reforms: Consumer and Market Perspectives.” Dennis Kelleher, president & CEO of Better Markets, a nonprofit advocate of financial reform, testified that one immediate remedy Congress could make to reign in Wall Street was to “fund regulators adequately.” The Street, he said, “is constantly overwhelming them; it’s an unfair fight.” Regulators like the Securities and Exchange Commision (SEC) “are so grossly underfunded that they don’t have the manpower or technology to keep up with the industry” or Wall Street.