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March 16, 2018

Good News for Undoing Harmful Financial Regulation

The Senate passed a bill repealing huge sections of Dodd-Frank. Let’s hope the House follows suit.

Something very unusual happened on Capitol Hill this week.

Senate Republicans and Democrats joined together to pass the Economic Growth, Regulatory Relief and Consumer Protection Act by a vote of 67-31. The bill was introduced by Republican Sen. Mike Crapo of Idaho, and it’s all about undoing the damage of Barack Obama-era financial regulation legislation.

To a significant degree, the act repeals the Dodd-Frank Act of 2010, which Barack Obama and his fellow Democrats passed in response to the financial crisis of 2008 — massive government intervention to address the very same crisis that was caused by Democrat policies of too much government intervention in the banking industry. (It takes a special kind of gall to create a crisis and then claim credit for trying to fix it with more of the same.) Predictably, Dodd-Frank only made matters worse, but the measure passed by the Senate this week repeals key aspects of that ill-conceived legislation.

However, one aspect of the current bill that’s not being repealed is the Consumer Financial Protection Bureau, a cadre of unelected and unaccountable government bureaucrats. As such, the CFPB can create new financial regulations without approval from anyone. They can also adolescently join the #Resist Trump movement without consequence.

Nonetheless, the bill raises the threshold for banks considered “too big to fail” from $50 billion to $250 billion. Consequently, more mid-level banks will be spared the federal government’s undue regulatory stranglehold. In addition, the act would free local and regional banks from having to comply with a laundry list of federal regulations that are too costly and time consuming. Banks would also have greater autonomy in lending money to small businesses and individuals.

This is how a free-market economy works. And Democrats are naturally opposed to letting the system function without the hands of the federal government pulling the strings. This bill certainly doesn’t wipe out all regulation, but it does restore some of the ability of small and mid-size banking institutions to operate efficiently and in the best interest of its customers. Claims that banks will now operate without any oversight are patently false.

In a video on his Senate website, Crapo states, “Currently, Washington’s one-size-fits-all regulation treats the smallest financial institutions like they were the largest financial institutions. It doesn’t make sense, and leaves Americans with fewer financial services options, depriving deserving people and small businesses of access to credit and capital.” He adds, “It keeps consumer protections in place and increases protections for those who fall on hard times or become victims of fraud.”

But it’s not a done deal yet. The Washington Post reports, “Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, has said that House Republicans will want to alter the Senate bill to reflect their priorities. But that could drive away the Senate Democrats needed to pass the legislation, and so the House will face significant pressure to accept the Senate legislation with few, if any, changes.” Republicans in the House want to be more aggressive in terms of rolling back regulations, so the passage of the Senate bill is clearly just a first step.

Nonetheless, the ultimate passage of the act will be good for the country and the economy.

White House Press Secretary Sarah Huckabee Sanders lauded the legislation’s passage, stating, “The bill provides much-needed relief from the Dodd-Frank Act for thousands of community banks and credit unions and will spur lending and economic growth without creating risks to the financial system.”

Despite the bipartisan support for this bill, Democrats were deeply divided over its passage. The Washington Post revealed that, according to an anonymous source, “after Warren called out red-state Democrats and other supporters of the bill by name in a fundraising appeal, Schumer encouraged her to stay focused on the substance in the debate.”

But why would such a prominent senator (and a potential 2020 presidential candidate), want to risk undermining unity among Democrats and position herself even further to the Left than she is already? Because Warren’s whole shtick is based on creating the perception that financial institutions can’t be trusted. No, in her bizarre alternate reality, only the government can be trusted with managing our money.

Warren repeatedly spreads this narrative to appear to be for the “little guy,” even though policies like Dodd-Frank make it even harder for all the little guys out there. But Warren’s criticism of the reform bill wasn’t enough to keep 12 Democrats from joining the Republicans. This leaves Warren in a precarious situation heading into an election cycle in which her party seems to be thinking about perhaps maybe kinda inching toward the center in order to improve its chances of taking back the House.

Now the bill heads off to that lower chamber, where Republicans still have the power to cut through the red tape and regulations that burden our economy and make it harder for individuals to buy homes or start businesses.

Democrats have always relied on party unity to stand in the way of commonsense policies, but this time they’ve been divided by President Trump and congressional Republicans, who may finally be figuring out how to govern as the majority.

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