WASHINGTON, DC – House Financial Services Committee Chairman Jeb Hensarling (TX-5) appeared before a breakfast meeting of The Ripon Society yesterday morning, delivering remarks about the impressive list of accomplishments his Committee has racked up over the past 18 months, and a key reform the panel plans to pursue in the coming year.

“Our committee has successfully guided 65 bipartisan bills through the House during the 114th Congress, and 31 of those have been signed into law,” Hensarling stated.  “I’m told that’s one of the best – if not the best – record of any House committee.  In an era of divided government, that’s not a bad record.  But we have so much more that needs to be done on behalf of the American people who are struggling in this economy that clearly just isn’t working for working Americans.

“They remain our top priority.  And for their sake, we must replace the failed Dodd-Frank Act and promote economic growth.  When they passed Dodd-Frank six years ago this month, Democrats told us it would ‘promote financial stability,’ ‘end Too Big to Fail,’ and ‘lift the economy.’  None of this has come to pass.  Dodd-Frank has achieved the opposite.  Today the big banks are bigger and the small banks are fewer. Even more banking assets are now concentrated in the so-called ‘Too Big to Fail’ firms.  Pray tell, how does this promote financial stability?

“Instead of ending ‘Too Big to Fail,’ Dodd-Frank writes ‘Too Big to Fail’ and taxpayer-funded bailouts into law.  Those on the Left who rail against a ‘rigged economy’ need to look in the mirror – because their ‘solutions’ like Dodd-Frank are precisely what rigs the economy to favor the big and the powerful and the well-connected!  Dodd-Frank is a modern day Tower of Babel — 2,300-plus pages with 400 new regulations spawning tens of thousands of pages of mind-numbing, job-killing, freedom-crushing red tape.  Our friends in the other party need to understand:  No law this big with this much regulation is ever good for ‘the little guy.’”

“No law this big with this much regulation is ever good for ‘the little guy.’”

To replace Dodd-Frank, Hensarling – who is serving his seventh term in the House and second term as Chairman of the Financial Services Committee – has authored The Financial CHOICE Act.  “CHOICE” stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.   According to Hensarling, the reform plan rests upon the following core principles:

1) Economic growth for all must be revitalized through free, competitive, transparent and innovative capital markets;

2) Every American, regardless of their circumstances, must have the opportunity to achieve financial independence;

3) Consumers must not only be vigorously protected from fraud and deception, but from the loss of economic liberty as well;

4) Taxpayer bailouts of financial institutions must end and no company can remain too big to fail;

5) Systemic risk must be managed through market discipline with profit and loss;

6) Simplicity must replace complexity because complexity can be gamed by the well-connected and abused by the Washington powerful; and,

7) Finally, both Wall Street and Washington must be held accountable.

“Our Republican plan rests on the belief that private bank capital is the most basic element in making a financial system healthy, resilient and reliable for economic growth,” the Texas Republican stated.  “Recent statements from a number of prominent economists show that there is a growing consensus surrounding the idea of a tradeoff between heightened capital levels and a substantially lower regulatory burden.

“Undoubtedly, a strongly capitalized banking sector can help avoid the recurrence of a financial crisis of the magnitude we saw in 2008.  But capital standards that were already complex have become even more complex and controlling with the latest iteration of the international Basel capital accords.  I do not believe this to be a good thing.

“The Financial CHOICE Act is a better approach.  It will relieve financial institutions that benefit from the Federal Reserve and the FDIC from regulations that create more burden than benefit.  In exchange, they must meet higher, yet simple, capital requirements.  Our reform plan allows banks to opt-in to an alternative regime that replaces growth-strangling regulation with reliable accountability. It stops investors from betting with taxpayer money.  Think of it as a market-based equity financed Dodd-Frank off-ramp.

“For banks willing to put their investors in front of hardworking taxpayers in the event of a failure, the Republican plan will free banks to help more Americans finance their individual American dreams. Another key part of our reform plan is to end ‘Too Big to Fail,’ once and for all.  The answer is simple:  bankruptcy, not bailouts.”

“We prefer bankruptcy over bailouts for three key reasons.   First, the bankruptcy process is administered through the judicial system, by impartial bankruptcy judges charged to guarantee due process in public proceedings.  This is in stark contrast to Dodd-Frank’s ‘Orderly Liquidation Authority,’ whereby government bureaucrats can exercise vast discretion to favor some creditors and impose losses on others.  Second, the bankruptcy process provides certainty for stakeholders to understand how the firm will be treated based on centuries of well-settled legal precedents.  The lack of certainty created the dangerous ad hoc policies of 2008, which helped precipitate the financial crisis.   Third, and most important, bankruptcy does not depend on taxpayer-provided funds to bail out, liquidate, or reorganize a failing institution.

“To ultimately end taxpayer-funded bailouts, we must also end Washington’s ability to designate any institution as ‘Too Big to Fail.’  And that’s exactly what the Financial CHOICE Act does. We must forever rid America of a system that says ‘capitalism on the way up, socialism on the way down.’  If we lose our ability to fail in America, we will surely one day lose our ability to succeed.  That’s true accountability – and accountability is at the heart of our Republican reform plan.”

To view the remarks of Chairman Hensarling before The Ripon Society yesterday morning, please click on the link below:

The Ripon Society is a public policy organization that was founded in 1962 and takes its name from the town where the Republican Party was born in 1854 – Ripon, Wisconsin. One of the main goals of The Ripon Society is to promote the ideas and principles that have made America great and contributed to the GOP’s success. These ideas include keeping our nation secure, keeping taxes low and having a federal government that is smaller, smarter and more accountable to the people.