House Financial Services Committee Chairman Jeb Hensarling (R-Texas) called the Dodd-Frank Act the “absolute epitome of Washington greed,” which he argued has made the U.S. “less financially stable.”
Former Sen. Chris Dodd (D-Conn.) and former Rep. Barney Frank (D-Mass.) defended the bill during an event marking 5 years since the bill was signed into law.
“For those who want Washington to be the final arbiter of acceptable financial risk in our economy, they should first consider whether Washington is even competent to manage risk. A review of the federal government’s track record in this area does not inspire confidence,” Hensarling said at the American Enterprise Institute on the bill’s fifth anniversary.
“The National Flood Insurance Program is $24 billion underwater and, yes, the pun is intended. The Pension Benefit Guaranty Corporation is running a total asset deficit of approximately $62 billion and fairly recently the Federal Housing Administration received their first taxpayer bailout courtesy of the Obama administration,” he added.
Hensarling said the greed of Washington is worse than the greed of Wall Street.
“It is an article of faith on the Left that it was Wall Street greed that really caused the crisis. My question to them is when hasn’t there been greed on Wall Street? How could that possibly be the determining factor? There is a much greater threat and that is Washington greed: the greed of the ruling elite for more power over an ever increasing share of our economy, our lives, and our liberty — and ladies and gentlemen, Dodd-Frank is the absolute epitome of Washington greed,” he said.
Hensarling argued that Dodd-Frank’s architecture has made the country “less financially stable,” pointing out that big banks are bigger since the bill was signed into law.
“The small banks are fewer but because Washington can control a handful of large established firms much easier than many small and zealous competitors, this is likely an intended, not unintended consequence of the Act. Dodd-Frank concentrates greater assets in fewer institutions,” he said. “It codifies into law ‘Too Big to Fail’ and taxpayer-funded bailouts.”
Sen. Dodd and Rep. Frank participated in a discussion about the effects of the law at the Newseum.
“Today, clearly, we are in far better shape than we were,” Dodd said at the event marking the bill’s fifth anniversary. “Of all the economies in the world, the one that is doing the best and the most stable is ours and it wasn’t a miracle, it was because of hard work that we put in place here.”
Frank addressed Hensarling directly.
“I wish I had his ability to say ridiculous things and be unphased by the potential reaction. He complains that nothing has been done since the bill passed about Fannie Mae and Freddie Mac,” he said. “The man’s party has been in control of the House of Representatives ever since. He is chairman of the committee that has jurisdiction over Fannie Mae and Freddie Mac. It’s this great Republican myth.”
The Democrats have had the majority in the Senate since 2011 when the Republicans took control of the House from the Democrats. The Republicans regained the majority in the Senate in January of this year.
Frank said he does not believe Dodd-Frank’s requirements for higher capital and having to “stand behind the risk you take” is a problem.
“If it is, then we’ve got to learn how to live with it,” he said.
Frank said opponents of the bill have “done a bait and switch.”
“They talk about how the community banks have been hurt but when they get a chance to legislate, they help the big banks,” he said.
Dodd said unintended consequences are not a reason not to legislate.
“There are always going to be unintended consequences,” he said. “There will probably be things down the road to change and modify. There’s nothing radical about that idea.”
According to Hensarling, Fannie and Freddie, the FHA and other taxpayer-supported programs backed more than 70 percent of subprime and Alt-A mortgages that led to the financial crisis.
“Liberals asked them to ‘roll the dice a little bit more.’ They did, and we all lost. If you have to point to a root cause of the financial crisis, this is it: government housing policies,” he said.