Step One In Getting Us Into A ‘Tremendous’ Recession Is Passing The Financial CHOICE Act
In 2016, Representative Jeb Hensarling (R-TX), of the House Financial Services Committee, introduced the innocuously named Financial CHOICE Act. This piece of legislation is designed to deregulate wall street and repeal the core tenants of Dodd-Frank. On Thursday, House Republicans voted to send the CHOICE Act to the floor to vote.
Now, when this bill will actually be presented to the entire House of Representatives for a vote is still unclear, but it will happen. And, when it does, lets hope our Congress strikes it down. Or else we’ll be hearing “nobody does recessions better than me, believe me folks” on a cable news network’s irresponsible coverage of a red-hat rally in no time.
Here’s a breakdown of what will happen if the bill’s most core elements are passed:
The Consumer Financial Protection Bureau (CFPB) will be stripped of its objectivity and independence
Republicans have had a hard-on for weakening the Consumer Financial Protection Bureau ever since it was created as part of Dodd-Frank in 2010, in response to the Great Recession. The Consumer Financial Protection Bureau’s purpose is “to promote fairness and transparency for mortgages, credit cards, and other consumer financial products and services.” Currently the CFPB is headed by a director who is granted the position by a vote in the Senate. But if the CHOICE Act passes, it will move the CFPB under the jurisdiction of the Executive Branch. Meaning the next Director of the Consumer Financial Protection Bureau could be picked by…Donald Trump.
Eliminating the Volcker Rule
Another provision of Dodd-Frank in Republican crosshairs is the “Volcker Rule.” Named after previous Federal Reserve Chairman, Paul Volcker, the Volcker Rule’s purpose is to forbid banks from making high-risk investments, based on speculation, and that do not directly benefit their customers. This is what all advocates’ and banking lobbyists’ fantasies look like. Remember on the campaign trail when Donald Trump accused wall street of “getting away with murder?” Well — if he were to sign this into law, it would make him the official getaway driver for all future wall street “murders.”
Repealing the FDIC’s Orderly Liquidation Authority (OLA)
When the investment bank Lehman Brothers collapsed in 2008 it was seen as patient zero for the coming financial collapse. Lehman’s downfall, and the almost death of AIG, placed panic and fear into our markets and threw our economy into a free-fall. Lucky for us, our 44th president was able to prevent the entire bottom from falling out, and markets are now at an all time high. Unlucky for us, the only reason he was able to halt the free-fall in the first place was through a taxpayer funded bailout. The orderly liquidation authority powers were created, as part of Dodd-Frank as a preventive measure from putting us, the taxpayer, on the hook for saving banks ever again. It allows the Fed and the FDIC to help failing institutions, so if the next Lehman Brothers comes along it won’t infect the entire economy like tumbling dominoes. There is condemnation of repealing the OLA across the aisle, but as of now it is still in the bill.
Eliminate the Durbin Amendment
The Durbin Amendment limits the amount of fees that banks can charge retailers for debit card transactions. Why Hensarling wants to eliminate the Durbin Amendment perplexes even his Republican colleagues, who know that this kills any little chance they had at receiving bi-partisan support. Also, as you may have guessed, retailers (and their lobbyists) hate the idea of the Durbin Amendment being repealed.
Make it easier for banks to pass economic collapse “stress tests”
Currently banks that do not pass this stress test are subject to more government regulation as means to prevent another Lehman Brothers situation, or the need for the FDIC to use their orderly liquidation authority. Under the new rules of this bill, passing these tests would be drastically easier and unstable institutions could slip through the cracks.
So that’s the Financial CHOICE Act in a nutshell. It’s an irresponsible, and unnecessarily reckless piece of legislation designed to give wall street back their ability to “get away with murder.” The FCA will remove the preventative oversight on our economic institutions that Dodd-Frank installed, and put our country at risk of entering into another great recession.