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The Financial CHOICE Act Will Restore Balance in the Financial Sector

June 5, 2017
Weekly Columns
This week, the House of Representatives will consider legislation that will provide badly needed regulatory relief to community banks, credit unions and consumers. The Financial CHOICE Act (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) will fundamentally alter the Dodd-Frank Act, which was enacted in 2010 in response to the financial crises of 2007-2008. Originally intended to minimize the risk to banks, it also had the unintended consequence of contributing to the slowest economic recovery in well over fifty years.
Dodd-Frank was initially focused on the largest financial institutions in the country, those with $10 billion plus in credit assets. Not surprisingly, its jurisdiction rapidly spread to community banks and credit unions. The financial crisis that spawned Dodd-Frank was caused, in large part, by risky, sometimes illegal, activities by the largest Wall Street Banks. It was appropriate to impose tighter restrictions on the organizations who caused the crisis. However, no credible evidence exists which would implicate community banks or credit unions in contributing to the financial crisis. By subjecting them to additional regulatory burdens, Dodd-Frank harmed small businesses and consumers.
When an entrepreneur decides to open a business, they are not likely to look to Wall Street for their loan. When a consumer decides to buy a new car, they also are not likely to seek financing from Goldman Sachs or Lehman Brothers. No, the aspiring small business owner, or would be homeowner, usually look to their hometown bank or credit union. In many cases, these people know their banker, and their banker knows them. Moreover, they have a shared objective of making good loans that allow the business owner and the consumer to pursue their dream and for the bank to recoup their loan. Holding small banks to the same standard as the largest banks ignores the obvious differences between Wall Street and Main Street.
The Financial CHOICE Act will bring regulatory relief to small banks, credit unions and consumers while holding Wall Street accountable. It will spur economic growth by simplifying regulations on smaller banks while still requiring transparency and imposing strict penalties on institutions that commit fraud or deception on their customers. And, finally, it will end taxpayer-funded bailouts and once and for all end the concept of any company or institution being “too big to fail.”
America’s greatest economic engine is, and always has been, small businesses. This success story has been fueled by the partnership between entrepreneurs and their fellow small businessmen who own and operate community banks, and the similar partnership between credit unions and their member / owners. Ending Dodd-Frank will strengthen those partnerships and, in so doing, strengthen America.