U.S. Rep. Duffy Says Financial Reform Attempts Have Failed America

A U.S. Congressman said on Wednesday that the government's attempts at financial reform, namely the Dodd-Frank Act passed in 2010, have missed the mark as the "unintended consequences" and "collateral damage" have outweighed the positives of reform attempts.

In an editorial for the Marshfield (Wisconsin) News Herald, U.S. Rep. Sean Duffy (R-Wisconsin) on Wednesday, Chairman of the House Committee on Financial Services' Subcommittee on Financial Services Oversight and Investigations, stated that as Dodd-Frank has been implemented over the last five years, "clearly, older does not mean wiser."

Duffy said in Wednesday's editorial at the time Dodd-Frank was passed in July 2010, President Obama promised it would "lift the economy," stabilize markets, protect Americans' hard-earned money, and end "too big to fail" to ensure that the failure of any one financial institution would threaten the stability of the global economy.

"Instead, for most Americans, the costs of doing business went up, while benefits went down," Duffy said. "Mortgages were harder to qualify for. Gone were the days of free checking, and when it game to getting that loan to open the small business of your American dream, your word was no longer as good as your bond."

The 2008 financial crisis occurred largely because of a combination of federal financial regulators failed to do their jobs and failure to anticipate problems in the subprime mortgages market, Duffy said.

"Instead, for most Americans, the costs of doing business went up, while benefits went down."

"It rewarded regulators’ incompetence with more responsibility, and it built a moat around 'too big to fail institutions,' while making it difficult for small banks to stay afloat—to say nothing of the untold damage it has done to our economy," Duffy said. "The law of unintended consequences has never been more apparent than when we look at Dodd-Frank."

Duffy said that while Dodd-Frank's goal may be worthy, "we must look at the collateral damage along the way and ask ourselves if we are going down the right path." In particular, the new regulatory environment has placed heavy burdens on community banks and smaller financial institutions; and while banks may be better capitalized, they are pulling out of market-making activities. For example, in July, Wells Fargo and Prospect Mortgage announced their departure from marketing activities that depend on mortgage servicing agreements due to regulatory uncertainty and Real Estate Settlement Procedures Act (RESPA) interpretations. With banks holding onto more capital and withdrawing from market-making activities, "these markets are left withering in the wake of Dodd-Frank and other internal regulations," Duffy said.

The controversial Consumer Financial Protection Bureau (CFPB), which was created by Dodd-Frank, was tasked with protecting consumers of financial products from predatory practices, according to Duffy, yet ironically the Bureau has come under heavy scrutiny for allegations that it discriminated against employees and subsequently retaliated against the whistleblowers.

In March, Duffy introduced a comprehensive package to reform the CFPB. In April, a Duffy-sponsored bill (H.R. 1265, or the Bureau Advisory Commission Transparency Act) calling for more transparency from the Bureau passed in the House by a 401 to 2 vote.

"This 'government-knows-best' mentality has gone too far," Duffy said. "Americans are capable of making financial decisions that they know to be in their best interests. The CFPB is putting its political ideology over your consumer freedom."