The House Financial Services Committee held a full committee hearing Tuesday to examine America’s economic prosperity in the five years since the Dodd-Frank Act became law.
It was the latest in a series focused on the impact Dodd-Frank has on the economy, lenders and capital markets.
When he signed Dodd-Frank into law five years ago this month, President Obama claimed Dodd-Frank would “lift the economy,” but the Republican majority says that it has done the opposite, making it harder for Americans to fulfill their aspirations and achieve their dreams for themselves and their families.
“Under the Obama economic strategy of which Dodd-Frank is a central pillar, our anemic recovery has created 12.1 million fewer jobs than the average recovery since World War II,” said Chairman Jeb Hensarling, R-Texas. “For more than a year now, the share of able-bodied Americans in the labor force has hovered at the lowest level in nearly 40 years. Small business startups are at the lowest level in a generation. Had this recovery simply been as strong as average previous ones, middle income families would have nearly $12,000 more in annual income, and 1.6 million more of our fellow Americans would have escaped poverty.
“The painful truth is that Dodd-Frank and the hyper-regulated Obama economy are failing low- and moderate income Americans who simply want their fair shot at economic opportunity and financial security,” Hensarling said.
Committee members said that thanks to the Consumer Financial Protection Bureau’s Qualified Mortgage rule, it is now harder for low and moderate-income Americans and minorities to buy a home.
Further, they heard, thanks to the crushing regulatory burden unleashed by Dodd-Frank’s 400 new federal regulations, there are far fewer community banks serving the needs of small businesses and families in communities across America than before Dodd-Frank was enacted, resulting in fewer financial products and services being offered, and at a higher cost.
“Most criticism of Dodd-Frank focuses on the massive increase in regulatory burden it has imposed, but the most costly and dangerous effect of Dodd-Frank, ObamaCare and virtually every other legislative and regulatory action of this Administration is the uncertainty and arbitrary power it has created by the destruction of the rule of law,” said Phil Gramm, Senior Partner, U.S. Policy Metrics and former Republican U.S. Senator.
Finally, because of the Volcker rule—the only rule of its kind in the industrialized world—U.S. capital markets are far less liquid and less competitive vis-à-vis other international financial centers than ever before, making it more expensive for U.S. companies to raise working capital and harming Americans saving for retirement or their children’s educations.
“I believe that all the new regulation added by the Dodd-Frank Act in 2010 is the primary reason for the slow growth this country has experienced since 2010….new regulations imposed on banks—particularly small banks—has created a bifurcated economy,” said Peter Wallison, Arthur F. Burns Fellow in Financial Policy Studies, American Enterprise Institute. “Large firms in the real economy, which can access the capital markets for financing, have been growing roughly in line with previous recoveries, but smaller firms that rely on banks for financing are growing far more slowly. Since most of the growth in the US economy, and especially in employment, comes from small firms, the economy is underperforming and will continue to underperform until the treatment of banks under Dodd-Frank Act is substantially modified or repealed.”