How to Improve the Replacement Plan for Dodd-Frank under President Trump

In 2016, Chairman Jeb Hensarling (R-TX) successfully passed his Dodd-Frank replacement bill out of the House Financial Services Committee. Named the Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs Act (H.R. 5983), Financial CHOICE Act for short, the passage of this bill out of committee was a significant first step toward full repeal of the misnamed Dodd-Frank Wall Street Reform and Consumer Protection Act.

But now with the election of Donald Trump to the Presidency and Republicans maintaining control of the House and the Senate, Congress has a perfect opportunity to improve the CHOICE Act and get it across the finish line into federal law. Short of fully repealing Dodd-Frank (the preferred option), the new and improved CHOICE Act –CHOICE 2.0 should include the following improvements:

  1. Fully repeal the Consumer Financial Protection Bureau (CFPB) under Title X of Dodd-Frank.
  2. Repeal Title VII of Dodd-Frank to reduce the concentration of financial risk and restore freedom and personal responsibility within the over-the-counter (OTC) derivatives market.
  3. Repeal the Community Reinvestment Act (CRA) that incentivizes banks to provide credit to low-income and moderate-income neighborhoods regardless of the financial risk. Sound underwriting-not social policies-should guide lending decisions. Banks exist to make profitable loans to all communities so federal coercion is unnecessary.
  4. Relieve banks of liability for disparate impact, but not for disparate treatment. Banks should not be held liable for unintentionally discriminating against consumers, but should be held liable if they discriminate based on race, color, religion, national origin, sex, marital status, or age when providing credit.
  5. Roll back FDIC Deposit Insurance to $40,000 per person (the pre–Savings & Loan crisis limit) in order to restore market discipline, reduce moral hazard, and strengthen the banking system and economy as a whole.
  6. Repeal all qualified mortgage (QM) and qualified residential mortgage (QRM) requirements under Title IX and XIV to allow private lenders to return to the market and expand access to credit for first-time homebuyers.
  7. Repeal section 1107 of Dodd-Frank so each Federal Reserve District Bank’s Board of Directors can select their bank president free of political influence from Washington, D.C.

Dodd-Frank undermines the housing and mortgage industries, reduces access to credit for the business community, and slows the economy as a whole. Consumers and small businesses pay higher prices, get fewer choices of financial products and services, and have less access to credit due to the regulatory costs imposed on banks, mortgage lenders, financial advisers, and a wide variety of other financial firms. It’s time for Republicans in Congress to work with the new administration and follow through on their commitment to dismantle Dodd-Frank by improving and passing CHOICE 2.0.

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