On July 21 what many hoped would be a bipartisan effort to reform Wall Street and ensure our economy avoids another fiscal meltdown ended on a partisan note. As a result, the financial regulatory reform bill President Obama signed into law will cost jobs, hurt our economy, and was passed with very little Republican support.
At more than 2,300 pages, even the chief architect of this bill, Senator Chris Dodd (D-CT), admitted "No one will know until this is actually in place how it works." For a bill which, to again quote Sen. Dodd, "deals with every single aspect of our lives," a rush to legislate is inexcusable.
What we do know is this bill does not reform Wall Street or the regulators who failed to protect the public. It will make life tougher on Main Street, especially for the small businesses, farmers, and ranchers who have acted responsibly while using credit to invest in the future.
The flow of credit and capital through the financial system is the building block of American prosperity. It has enabled entrepreneurs to pursue their ideas and is absolutely necessary for any ag producer. When businesses can't access capital from banks, consumers don't spend, small businesses hunker down, farms and ranches struggle, and investment dries up.
The legislation establishes a 10-member Financial Stability Oversight Council composed of regulators which will be responsible for monitoring and addressing system-wide risks to the financial system. This council will have nearly unlimited powers to draft financial firms into the regulatory system and even force them to sell off or close pieces of themselves. The bill also establishes a permanent bailout capacity within the federal government by providing the FDIC unlimited borrowing authority to risk taxpayer dollars in winding down firms deemed "too big to fail."
Unfortunately, the government overreach doesn't stop here. The bill creates a new Bureau of Consumer Financial Protection with broad powers to regulate the financial products and services which can be offered to consumers. This new agency could impede the efforts of existing regulators to ensure the safety and soundness of financial firms, making even credit-worthy farms, ranches, and small businesses unable to access the credit they need to invest in their futures.
Finally, despite the repeated assurances of ending the era of bailouts, the bill does nothing to address Fannie Mae and Freddie Mac, two of the largest recipients of federal bailout money. These insolvent entities played a major role in creating the housing bubble which led to the economic meltdown of 2008 and they stand today as the primary remaining bailout debtors to the U.S. treasury owing almost half of the outstanding bailout money. Not even attempting to reform Fannie Mae and Freddie Mac can only be considered a failure on Congress' part.
They say the definition of insanity is to do the same thing over and over again and expect different results. True financial reform would put a permanent end to bailouts and too-big-to-fail. If this law was actually written to end bailouts and prevent future economic crises, it would have enjoyed broad, bipartisan support. Instead, Democrats chose to give Washington bureaucrats more control over nearly every financial decision families, farms and businesses make.
Instead of learning from the failures of 2008 which brought our economy to the very edge, this financial services regulatory reform bill is just another step by those who want to see Washington D.C. prescribe economic outcomes across the economy. The federal government should not be in the game of picking winners or losers. We must start focusing on creating private sector jobs, not more public sector programs.
House Republicans offered a better plan which protects consumers and actually addresses the root causes of the financial crisis. Whether it was the stimulus bill, the health care bill, the cap-and-trade energy bill, or this financial services bill -- we need a set of solutions which answer the real challenges facing our nation instead of imposing more burdens and regulations on our already struggling economy.