NEW YORK – House Financial Services Committee Chairman Jeb Hensarling (R-TX) today unveiled details of the Financial CHOICE Act – the Republican plan to replace the Dodd-Frank Act and promote economic growth. CHOICE stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.
“If we want strong economic growth and more freedom, we must empower Americans, not Washington bureaucrats. We must offer all Americans greater opportunities to raise their standard of living and achieve financial independence. In a phrase, we need economic growth for all and bank bailouts for none. This is the foundation of the Republican plan to reignite growth by replacing Dodd-Frank with real reforms that work,” said Chairman Hensarling.
In a speech to the Economic Club of New York on Tuesday, Chairman Hensarling cited an inventory of harm caused to consumers and the economy by Dodd-Frank and branded the law “a grave mistake” that “has failed.”
The Financial CHOICE Act, which Chairman Hensarling said will be introduced as legislation later this month, will end taxpayer-funded bailouts of large financial institutions; relieve banks that elect to be strongly capitalized from “growth-strangling regulation” that slows the economy and harms consumers; and impose tougher penalties on those who commit fraud as well as greater accountability on Washington regulators.
ACCOUNTABILITY FOR WALL STREET AND WASHINGTON
“Accountability is at the heart of our Republican reform plan. If we are to successfully protect consumers and grow our economy, we must demand greater accountability from both Washington and Wall Street,” said Chairman Hensarling. “Our plan toughens penalties – not out of some ideological or poll-driven war against Wall Street – but simply to better protect consumers and strengthen their markets. This is key to economic growth.”
BANKRUPTCY, NOT BAILOUTS
To end taxpayer-funded bailouts and “too big to fail,” the Financial CHOICE Act will create a new subchapter of the Bankruptcy Code tailored to specifically address the failure of large, complex institutions. In April, the House approved similar bipartisan legislation to establish a new bankruptcy process for financial institutions with assets of $50 billion or more.
“Taxpayer bailouts of financial institutions must end, and no company can remain ‘too big to fail,’” said Chairman Hensarling. As a result of the Republican plan, “some large firms will likely become smaller because the credit they now obtain will be priced according to their inherent risk of failure without implicit government guarantees backing firms that are ‘too big to fail.’ As a result, failure — when it does happen — will be more contained.”
STRONGLY CAPITALIZED BANKS
Banks that make the choice to be strongly capitalized will be eligible for relief from Washington regulations “that create more burden than benefit,” Chairman Hensarling said. “To avail themselves of this exchange, many larger banks will have to raise significant additional equity capital. Most community banks will have to raise little to no additional capital. Regardless, the option remains with the bank.”
PRO-GROWTH REGULATORY RELIEF
The Financial CHOICE Act also includes more than two dozen measures to provide additional regulatory relief for community banks and credit unions. While big banks have gotten even bigger since Dodd-Frank became law nearly six years ago, community financial institutions are disappearing at an average rate of one per day. Dozens of witnesses representing small banks and credit unions have come before the Financial Services Committee to describe the harm caused to their customers by the avalanche of Washington’s post-crisis regulations.
“Pro-growth reforms in our plan will provide much-needed relief to community financial institutions that are being crushed by Washington’s one-size-fits-all regulatory approach,” said Chairman Hensarling. “This allows America’s small hometown banks and credit unions to focus their time and resources on their customers rather than the dictates of Washington bureaucrats.”
Further details about the Financial CHOICE Act can be found here. A full transcript of the Chairman's speech, as prepared for delivery, can be found here.