Over the past decade, congressional legislation enacted into law by both parties have been regulatory job killers that are death knells to economic growth and prosperity. From Sarbanes-Oxley to Dodd-Frank, Congress’ costly red tape has affected everyone from credit card holders to Main street small businesses.
There is little debate that the cost of regulation is staggering. In 2012, Obama’s Small Business Administration (SBA) admitted that complying with federal regulations alone costs $1.7 trillion annually. Things have only gotten worse. American Action Forum released a study analyzing the overwhelming costs of Dodd-Frank alone was $24 billion in final rule costs and 61 million paperwork burden hours.
While politicians love to claim they are reigning in business, the real costs of their regulations are imposed on consumers. Prior to the enactment of Dodd Frank, 75% of banks offered free checking and just two years later only 39% of banks continued to do so. The minimum average balance necessary to qualify for free checking has doubled over the same time period. Credit card incentives like airline miles have been curtailed in part to the costs imposed by the bill’s Durbin Amendment, which imposed price controls on the fee paid between banks for the acceptance of card based transactions. The real beneficiaries of the Durbin amendment was not consumers but Durbin’s political allies — the big retailers.
Rep. Jeb Hensarling is preparing to do something.
Hensarling, a free market champion, is expected to release a congressional white paper next week outlining a true reform agenda designed to jump-start the economy by unleashing the regulatory shackles that hinder the economy. Sources suggest that the document will include plans to:
— Reign in the Most Undemocratic Institution in American Government: The Consumer Financial Protection Bureau (CPFB). Housed at the Federal Reserve, the CFPB has the ability to put complete industries out of business in one full swoop. Its unelected Director has the discretionary power to declare financial products “abusive” and essentially outlaw it by declaratory fiat. Many believe the CFPB will use that power in the coming months to outlaw short-term lending, cutting off credit options for the middle class.
— Fix the Dodd-Frank-Volker Rule. Concocted in 2010, the rule was designed to prevent banks from engaging in proprietary trading. Of course, not one of the 450 institutions that failed in 2008 and 2009 failed due to proprietary trading. This form of trading allowed financial institutions to diversify their income streams to continue to lend money to small businesses in tough financial times. Without different sources of revenue, small business and entrepreneurs will be choked off from credit during tough economic times.
— End the Crony Credit Card Price Control Scheme. The Durbin Amendment, offered at the behest of big retailers, imposed price controls on credit card transaction fees. The end result was less consumer choices and the elimination of free checking for consumers. Lower and middle class Americans now must pay fees to put their money in the bank where they receive essentially no interest.
— Reform the Financial Stability Oversight Board (FSOB). Like the CFPB, the FSOB operates out of public view but has immense power to control large portions of the American economy. When regulators feel asleep at the wheel during the housing crisis, they were rewarded with more power. The FSOC allows regulators to unilaterally define vague statutory terms like “systemic risk,” “financial stress,” dictating the capital standards, product mix and lending activities of major financial firms within our economy. Should firms not bow to FSOC’s will, FSOC is even empowered to break them up.
Central planning of our financial sector has not created jobs, it has killed them. It has not limited risked, it has created more. It has not encouraged economic growth, it has shackled it.
The time has come to allow the power of the market to return us back to a prosperous America and Jeb Hensarling will be leading the way.