Gut FinReg Too
Subprime Scandal: Barney Frank's replacement as head of the House banking panel vows to dismantle what's been done in the name of financial reform. Time also to undo the anti-Wall Street spin.
Rolling back FinReg, which was based on a false assumption that Wall Street caused the financial crisis, is just as critical as repealing or defunding ObamaCare.
Republicans ought to go through Frank's monstrosity, page by page, and strip out all its jobs-killing and capital-killing provisions — along with the new race-based mandates Democrat Rep. Maxine Waters stuck in. Such politically mandated lending is what got us into this mess in the first place.
Incoming House Financial Services Committee Chairman Spencer Bachus, R-Ala., promises to do just that. He argues that the Dodd-Frank Wall Street Reform and Consumer Protection Act puts Wall Street at a disadvantage against London, Hong Kong and other financial centers. It also constricts capital, he says in a recent letter to the Treasury chief, "hobbling the provision of credit necessary for economic recovery in the U.S."
Indeed, the massive red tape generated by Dodd-Frank threatens to strangle the banking industry, choking the flow of credit for years to come. A new report by the American Bankers Association warns the coming "tsunami of regulations" could wipe out hundreds of smaller banks.
The graveyard of lenders is already crowded. Some 140 banks were closed in 2009. This year we're well on the way to reaching 200. Meanwhile, the FDIC reports 775 additional institutions on its "problem bank" list. The regulatory burden imposed on these shaky banks could spell disaster. Dodd-Frank has already generated 5,000 pages of new rules from just three of its 16 titles. Looking at this tidal wave of new regulations, bank boards must reassess whether they should continue operating independently.
"ABA estimates that the pressures on bank consolidation produced by new legislation and regulations could result in 1,000 fewer banks by the end of the decade," ABA says in a letter to the FDIC. Which means consumers can look forward to higher rates and fees as the industry consolidates to survive.
Asked about GOP talk of repealing FinReg, White House spokesman Robert Gibbs argued the new banking rules are "what people want," and they won't let Republicans water them down. But the Americans didn't bargain for 1,000 fewer banks. Or a Consumer Financial Protection Bureau headed by Harvard radical Elizabeth Warren, who wants to cap interest rates and nationalize banks.
Gibbs may point to polls showing a majority of Americans blame Wall Street bankers for the crisis. But that's merely an echo of the false narrative spun by the White House and Democrat Congress about what caused it. The historic record clearly shows that Wall Street merely helped inflate a housing bubble caused by government social policy designed to boost minority homeownership.
Since FinReg was aimed at the wrong target — and completely misses Fannie and Freddie and the affordable housing policies that drove them into the subprime securities market — it deserves to be dismantled.
To do that, however, Republicans will first have to reopen the debate over the root causes of the crisis, as public opinion has calcified around the administration's and its friends in the media's false narrative that Wall Street and the private sector did it.
Bachus should hold hearings on the matter as his first order of business, using his subpoena power and calling before his committee all the government witnesses his predecessor, Frank, and the Angelides Commission refused to call in their cover-up of Washington's role in the subprime debacle.
