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Financial Planning > Behavioral Finance

House Dems Blast Financial Choice Act, Call for Another Hearing

By Melanie Waddell

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House Financial Services Committee Chairman Jeb Hensarling officially reintroduced Wednesday his Financial Choice Act of 2017, reiterating his stance that the bill “is a better way” than the Dodd-Frank Act, which he said has been “a greater burden to enterprise than all other Obama-era regulations combined.”

During the Wednesday hearing to examine the Choice Act – which went on for more than three hours before breaking for a floor vote (and then resumed) — Democratic members of the committee lambasted the bill and implored Hensarling to assure them that there would be more than one hearing to discuss it.

Published reports say the bill is scheduled to be marked up by the committee on May 2.

All Democratic members of the committee sent a letter to Hensarling the same day requesting an “additional” hearing on the legislation.  

The full Senate voted the same day, 61-39, to advance the nomination of R. Alexander Acosta to be Labor secretary.

“This is a huge piece of legislation,” said Rep. Emanuel Cleaver, R-Missouri. “Will there be additional hearings due to the significant nature of this legislation and how huge the bill is?” he asked Hensarling. “We had 41 hearings on Dodd-Frank.”

Hensarling responded that “145 different hearings” have been held on the Dodd-Frank Act, which have included “aspects” of the Choice Act. “I expect to have more hearings on all aspects of Dodd-Frank, the Choice Act and banking.”

The top Democrat on the committee, Rep. Maxine Waters of California, chimed in, asking Hensarling to clarify if there would be additional hearings on the Choice Act alone. 

Hensarling responded that 145 hearings have been held on “problems” associated with the Dodd-Frank Act, and that he planned to hold a “dozen more hearings” on Dodd-Frank.

“To give it [the Choice Act] only one day, one hearing, is dangerous for the American people,” added Rep. David Scott, D-Ga. “This should be a very definitive Republican and Democratic partnership working together.”

Added Rep. Stephen Lynch, D-Mass.: “It is the worst bill I’ve ever seen,” that includes a “compendium of bad, bad ideas… I’m not sure you should be proud of it. It essentially repeals Wall Street reform.”

Lynch continued: “We’re paving the way” for the next recession in the Choice Act. Rep. Brad Sherman, D-Calif., told Hensarling there are “twelve bills that the Choice Act has swallowed up,” and that those bills “have bipartisan support and will pass if we bring them up separately.”

What’s in the Act

The Act’s measures include dismantling the Consumer Financial Protection Bureau, getting rid of the Volcker Rule, and requiring the Labor Department to issue a fiduciary rule that mirrors one promulgated by the Securities and Exchange Commission.

Hester Peirce, director of the Financial Markets Working Group and Senior Research Fellow at the Mercatus Center at George Mason University, who testified at the hearing, told ThinkAdvisor in separate comments that the Choice Act would “repeal the DOL’s fiduciary rule and give the SEC the lead in the fiduciary rule space. The SEC is the more natural regulator to take the lead in this area, given the agency’s extensive experience with retail investors.”

In his opening remarks, Hensarling said his bill “replaces onerous government fiat with market discipline; ends bailouts with bankruptcy; throws a deregulatory life preserver to our community financial institutions; replaces complexity with simplicity; holds both Washington and Wall Street accountable; and unleashes capital formation so the economy can move yet again for the betterment of our citizens.”

Under the Financial Choice Act, he said, “there will be economic opportunity for all and bank bailouts for none.”

Peter Wallison, Arthur F. Burns fellow in financial policy studies at the American Enterprise Institute, who testified at the hearing, stated that “one way to understand the [Choice] act and the need for the comprehensive reform that the Choice Act provides, is to recognize that the Dodd-Frank Act was completely unnecessary.”

Dodd-Frank, he said, “was based on a false diagnosis of the 2008 financial crisis by an administration and a Congress that didn’t even try to understand why the crisis occurred. They simply assumed — or wanted to believe — that the crisis was caused by insufficient regulation of the financial system and greed on Wall Street.”

Wallison went on to say that the causes of the 2008 financial crisis “had nothing to do with a lack of regulation, or even greed on Wall Street. That is why the major provisions of this destructive [Dodd-Frank] law should be repealed.” The crisis, he asserted, “was caused by the government’s housing policies.”

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