GOP, Dems divided on Dodd-Frank during anniversary hearing

Republicans and Democrats on the House Financial Committee disagreed on the effectiveness of the Dodd-Frank Act during a nearly four-hour hearing on July 15. .Testimony marked the 15-year anniversary of the act's passage, which came on the heels of the 2008 financial crisis. Republicans hold majorities in the House and Senate along with the presidency, making changes possible to the landmark bill. Republicans criticized what they see as the overreaches of Dodd-Frank, while Democrats defended the 2010 bill as crucial to prevent a downturn similar to the Great Recession. A major point of contention was the Consumer Financial Protection Bureau. The consumer protection agency, established as part of Dodd-Frank, has been dismantled as part of President Donald Trump’s push to downsize the federal government. Republicans described the CFPB as unaccountable, while Democrats portrayed the agency as essential to protecting consumers. Democrats said that dismantling the agency leaves the financial system at greater risk of a crisis similar to the 07-08 downturn.Testifying during the hearing, Consumer Bankers Association President/CEO Lindsey Johnson said the CFPB became more politically active during the Biden administration. She called on the bureau to return to what she sees as its core responsibility of preventing consumer harm. The mass downsizing of the CFPB means the bureau can no longer protect servicemembers, testified Dennis Kelleher, president and CEO of Washington, D.C.-based financial reform advocacy group Better Markets.Substantial compliance costs under Dodd-Frank led some small banks to exit the mortgage business, testified Paul Kupiec, senior fellow at the American Enterprise Institute. Larger banks had more compliance staff to handle heightened compliance standards. House Financial Services Committee Vice Chair Bill Huizenga (R-Mich.) said Dodd-Frank has enabled sweeping authority and promoted a “woke” ideology. Though the financial system is more resilient than before Dodd-Frank, sections of the bill are now too burdensome, added Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association trade group. Republicans traced the increased compliance standards under Dodd-Frank to a 40 percent decrease in bank charters to fewer than 4,500. Large unrealized interest rate losses that could have been detected leading up to the 2023 failure of Silicon Valley Bank show the Financial Stability Oversight Council has limited ability to detect systemic risk, said Financial Services Committee Chair French Hill (R-Ark.). Congress should assume oversight over the Financial Stability Oversight Council, testified Paul Kupiec, senior fellow at the American Enterprise Institute. A bill sponsored by Reps. Bill Foster, D-Ill., and Huizenga would limit the powers of the FSOC. The hearing took place during “Crypto Week” as lawmakers were expected to vote on the GENIUS Act. The GENIUS Act faced some opposition from Democrats who said President Donald Trump had a conflict of interest due to his family’s holding of cryptocurrencies. The bill would establish a regulatory framework for stablecoin issuers and offer a path for banks to issue payment stablecoins. Democrats compared the rise in crypto to the onset of complex financial products, which are now cited as a cause of the 2007-08 mortgage crisis. “History doesn’t repeat itself, but it rhymes,” said Rep. Brad Sherman (D-Calif.).