House Financial Services Committee Chairman Jeb Hensarling’s Financial CHOICE Act — the sweeping financial reform bill that seeks to replace the Dodd-Frank Act and kill the Department of Labor’s fiduciary rule — passed out of committee Tuesday by a 30-26 vote.
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During the contentious markup of the bill, Hensarling, R-Texas, repeatedly stated his Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs (CHOICE) Act offers a “better way” to economic growth and protecting investors than Dodd-Frank.
The Dodd-Frank Act, which was passed six years ago, has failed to lift the nation’s economy, Hensarling argued. “Instead we are stuck in the slowest, weakest, most tepid recovery in the history of the Republic. The economy does not work for working people. They have seen their paychecks stagnate. They have seen their savings decimated. We have seen millions who remain unemployed and underemployed and an economy working at roughly half of its potential. There is a better way,” Hensarling said.
Dodd-Frank has not ended “too-big-to-fail” bailouts of large financial institutions, Hensarling said, stating that his bill “provides economic growth for all; bailouts for none. It ends bailouts. It ends too-big-to-fail once and for all and assures that these companies are subject to bankruptcy, not bailout.”
Hensarling said in June his goal was to have the CHOICE Act marked up this month.
The Act would block the Labor Department from implementing its new fiduciary rule by incorporating into the bill Rep. Ann Wagner’s, R-Missouri, Retail Investor Protection Act, H.R. 1090, which passed the House last year and requires the Securities and Exchange Commission to move first on a fiduciary rulemaking before DOL can implement its fiduciary rule.
While the CHOICE Act could pass the full House, “there is no companion bill in the Senate, or evidence of an inclination to do something similarly massive,” Jim Lardner, communications director for Americans for Financial Reform, told ThinkAdvisor after Tuesday’s vote.
The current congressional session ends in December, but Hensarling could reintroduce the bill next year. President Barack Obama vetoed in early June resolutions passed by the House and Senate to kill DOL’s rule amending the definition of fiduciary under the Employee Retirement Income Security Act.
Democratic lawmakers lambasted the bill during the Tuesday markup, arguing that dismantling the Consumer Financial Protection Bureau would be bad for investors.
“This bill is so bad that it simply cannot be fixed,” charged Rep. Maxine Waters, D-Calif., ranking member of the Committee. “This markup is not a serious attempt to move thoughtful legislation, evidenced by the fact that we only had one hearing on one portion of the bill.”
Waters called the Act “a rushed, partisan messaging tool” that seeks to deregulate Wall Street. Democrats, she told Hensarling, “will not offer any amendments, and we move to dispense with this political theater.”
Rep. Carolyn Maloney, D-N.Y., said the CHOICE Act “can only be described as deeply disturbing” legislation that would take the financial regulatory framework back to the “Stone Age” and be a “disaster for consumers, investors and [the] entire financial system.”
Maloney said the bill seeks to “completely gut the CFPB, which has been an effective watchdog for consumers,” noting the CFPB’s recent $185 million fine against Wells Fargo for illegally and secretly opening unauthorized deposit and credit card accounts.
“We should not be making it easier for banks to abuse consumers, but that’s what this bill does,” Maloney said. “I urge my colleagues to oppose this dangerous bill.”
Americans for Financial Reform, which includes AARP and the Consumer Federation of America, complained the bill’s provision requiring regulatory agencies like the SEC to conduct a “thorough” cost-benefit analysis on their rules sets up “an impossible obstacle course of procedural hoops (for example, estimating all the ‘anticipated direct and indirect effects’ of any proposed regulation), and require[s] every significant new rule to gain the explicit advance approval of both houses of Congress.”
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