Freeing Financial Markets
A Conservative vision for American Banking calls for establishing transparent, efficient markets where consumers can obtain loans they need at reasonable rates based on market conditions. Unfortunately, in response to the financial institution's crisis of 2008-2009, the Democratic-controlled Congress enacted the Wall Street Reform and Consumer Protection Act, otherwise known as Dodd-Frank. They did not let the crisis go to waste but used it as an excuse to establish unprecedented government control over the nation’s financial markets. The consequences have been bad for everyone except federal regulators.
Rather than address the cause of the crisis — the government’s own housing policies — the new law extended government control over the economy by creating new unaccountable bureaucracies. Predictably, central planning of our financial sector has not created jobs, it has killed them. It has not limited risks, it has created more. It has not encouraged economic growth, it has shackled it.
Since the enactment of Dodd-Frank, the number of community banks has significantly declined, and the cost and complexity of complying with the law have created impediments to the remaining banks’ ability to support the customers they serve. From 13,000 community banks in 1985, only 1,900 remain. Still, the majority of agricultural loans and small business loans are made by community banks. From start-ups foregone to home loans not made, Dodd-Frank’s excessive regulation and burdensome requirements have helped contribute to the slow economy we all endure today under President Obama and the Democrats.
Community banks are essential to ensuring small businesses have easy and affordable access to the capital they need to grow and prosper. Community banks should be relieved of excessive regulations. We support removing roadblocks and regulations that prevent access to capital.
The worst of Dodd-Frank is the Consumer Financial Protection Bureau, deliberately designed to be a rogue agency. It answers to neither Congress nor the executive has its own guaranteed funding outside the appropriations process and uses its slush fund to steer settlements to politically favored groups.
Its Director has dictatorial powers unique in the American Republic. Its regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks, and makes it harder for Americans to buy a home. Its one-size-fits-all approach to every issue threatens the diversity of the country’s financial system and would leave us with just a few enormous institutions, as in many European countries.
If the Bureau is not abolished, it should be subjected to congressional appropriation. In that way, consumer protection in the financial markets can be advanced through measures that are both effective and constitutional. Any settlements arising from statutory violations by financial institutions must be used to make whole the harmed consumers, with any remaining proceeds given to the general Treasury. Diversion of settlement funds to politically-connected parties should be a criminal offense.
Republicans believe that no financial institution is too big to fail. We support legislation to ensure that the problems of any financial institution can be resolved through the Bankruptcy Code. We endorse prudent regulation of the banking system to ensure that FDIC-regulated banks are properly capitalized and taxpayers are protected against bailouts. We will end the government’s use of disparate impact theory in enforcing anti-discrimination laws with regard to lending.