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On May 4th, the House Financial Services Committee passed the Financial Choice Act and is expected to vote on it next week in the House, which repeals some Dodd-Frank regulations and reforms others. Many people blame Dodd-Frank for stiffening American economic growth and limiting lending from American banks.
Rep. Jeb Hensarling (R-TX) is the man responsible for creating the Financial Choice Act and managing to get it through the House Financial Services Committee (he is the chair) and has managed to avoid most of the debacles surrounding the American Healthcare Act by introducing a bill that has wide conservative support with promises to make modifications later. And they made modifications.
For example it does not repeal the Durbin Amendment, which is one of the most damaging parts of the Dodd-Frank regulation law. The Durbin Amendment imposes price controls on on credit card fees, which have cost consumers billions. It’s full of cronyism as the credit card companies called for it; Senator Dick Durbin, the sponsor of the amendment and namesake said this on the Senate floor,“I had the CEO of Walgreens contact me last week, and he told me that when they look at the expenses of Walgreens … it turns out the fees that Walgreens pays to credit card companies is the fourth largest item of cost for their business.”
In addition, the ‘savings’ it was supposed to have didn’t occur and forced card companies to charge the maximum processing fee for smaller transactions, making lower income and small businesses pay the same fee for small transactions as they do for large transactions, increasing costs. It has also increased the interchange fee, which used to be 1 to 3 percent (average was 1.15 percent).
We can go on and on why it is a bad amendment but Hensarling took it out. It’s compromise in order to get more votes for the measure, but it still means that he fell to the pressure. He’s also the only one who can put it back in there and it looks like it will stay out.
Still, this does not mean that Hensarling should be held to the fires too harshly. For example, it regulates the Consumer Financial Protection Bureau (CFPB) which operates without congressional oversight and wields vast regulatory powers granted to it by Dodd-Frank. It is funded by the Federal Reserve, so it is not subjected to the powers of the purse, unlike most federal agencies.
The CFPB also had its structure ruled unconstitutional last year by a federal appeals court. The CFPB is of course appealing the decision, but the fact remains that a federal court ruled that the agency was unaccountable and therefore violated the Constitution’s separation of powers.
The Choice Act changes this by making the CFPB more accountable and making it more focused on consumer protection and expanding competitive markets. It’s a good part of the bill and Hensarling should be commended on keeping it.
Dodd-Frank hasn’t done its purpose. Retail prices have increased despite the law. Merchants haven’t decreased their prices and in most cases, either increased their prices or limited the use of debit cards in purchases. It limits convenience for consumers (which can be blamed on the Durbin Amendment) who cannot use their debit cards for things as simple as a cup of coffee at their local 7-11.
Consumer banking fees have increased by over $8 billion a year, fees on checking and saving accounts have increased from 3 to 5 percent, and a million people lost their banking accounts. The law has made poor people poorer and rich people richer.
In addition, the law has almost destroyed free checking, which went from 76 percent to 38 percent since the Durbin Amendment was put into place.
Governing is hard, as Speaker Paul Ryan said. But the Choice Act is an example of how Republicans can govern, get things done, and deliver on President Trump’s agenda without dividing the party and destroying political capital like the AHCA did. There are still problems with the bill, but it will likely end up on President Trump’s desk, if the Republicans can convince at least nine Democrats to vote with them.