Mar 8, 2011

GROVER: Dismantling overbearing financial reforms Repeal is unlikely, but they can be taken down brick by brick

washingtontimes says,the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law by President Obama last year, enshrines “too big to fail,” further politicizes the Federal Reserve by planting diversity czars at each of its banks, imposes a huge regulatory burden on the consumer financial services industry, and does nothing to prevent what caused the financial crisis: easy Fed credit and politically driven weakening of mortgage credit underwriting.

Doughty Rep. Michele Bachmann, Minnesota Republican, has introduced legislation to repeal the Dodd-Frank Act in its entirety. A laudable goal, but while conceivably repeal can pass the House, mustering 60 votes in the Senate will be tough. A two-thirds majority necessary to override an all-but-certain Obama veto is unlikely. Nonetheless, a repeal vote would be symbolically valuable.

In the absence of outright repeal, it should be dismantled, brick by brick.

The Consumer Financial Protection Bureau (CFPB) and debit-card interchange price controls are two worthy targets to start with. The CFPB will wield vast authority to define and ban consumer financial products and suppress innovation, reducing the availability of consumer financial services.

An animating CFPB sentiment is the perception that financial institutions are fat-cat bankers - rapacious and untrustworthy - and many American consumers should not be trusted to manage their own financial affairs. Rather, Washington mandarins are better equipped to decide what’s in Joe and Sally Sixpacks‘ best interest than they are.

Before 2009, the Fed’s regulatory approach was to work toward full disclosure of consumer financial products’ material facts. Consumers were considered sovereign - a notion few questioned for the first several centuries of the Republic.

How radical is it to suggest Americans who can vote, serve on a jury and join the Army ought to be considered competent and free to choose a credit card?

But today, many members of Congress and regulators are at heart paternalists. Most Americans, however, want to govern themselves.

Those who want to roll back Mr. Obama’s regulatory onslaught on the financial services sector should propose narrowing the CFPB’s mandate to ensuring products’ material facts are fully disclosed. Then consumer choices in the market can determine what financial products succeed and fail.


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