Missouri 3rd District Congressman Blaine Luetkemeyer is praising President Trump’s efforts to dismantle major components of the Dodd-Frank act.
Dodd-Frank was drafted in 2010 to safe-guard against a repeat of the country’s 2008 financial crisis.
Lurtkemeyer, a Republican, served as a bank regulator for the state of Missouri earlier in his career, and as a state representative, was Chairman of the Financial Services Committee.
He’s now a member of the House Financial Services Committee which passed the CHOICE Act to replace Dodd-Frank.
Luetkemeyer is especially critical of a provision in the law known as the Orderly Liquidation Authority (OLC). It lets the FDIC keep large failed banks afloat long enough to dismember them without triggering a financial meltdown. Luetkemeyer claims the measure isn’t necessary and is a waste of taxpayer money.
“I can tell you as a former bank examiner, you don’t need to have an Orderly Liquidation Authority when you have bankruptcy, and you have the FDIC with the ability to wind down institutions by either downsizing them, or selling them to other entities.”
Luetkemeyer speaks highly of Trump’s recent executive memos to scrutinize portions of the Dodd-Frank Act, including the OLC.
Former Federal Reserve Chairman Ben Bernanke is a major proponent of the OLC. In a column for the Brookings Institute, he called it “an essential tool for ensuring that financial stress does not escalate into a catastrophic crisis”.
Trump will not be able to the repeal the OLC, or the Dodd-Frank Act as a whole, through his executive authority. He will be able to weaken the law by abandoning it.
Luetkemeyer thinks the OLC is especially noxious because it allows the FDIC to bail out large failed banks with taxpayer money, when responsibility really lies with stock holders.
“Part of our American system is the ability to succeed, and the ability to fail” said Luetkemeyer. “The ability to fail is what tempers risk, and makes sure that people do risk in a very sensible, common sense way.”
Republicans contend regulations in the Dodd-Frank Act that are meant for the biggest banks with assets over a trillion dollars, are wrongly being applied to midsize and small banks with assets under $50 billion.
Lutkemeyer says a large numbers of small community banks are failing because of those regulation.
“All of these different rules and regulations, while they’re well intentioned, are costing small and midsized banks lot-and-lots of money. And as a result, if you’re too small, you can’t spread those costs out. And then you wind up having to either dissolve your bank, or sell it to somebody who can afford to assimilate it into their operation.”
Democrats, who largely support the legislation, say they’re willing to make minor changes to it. The also says repealing it would open the financial industry up to deceptive and predatory practices.
5th District Democratic Congressman Emanuel Cleaver, like Luetkemeyer, is also a member of the House Financial Services Committee. He issued a statement to Missourinet supporting Dodd-Frank.
“I am opposed to the Financial CHOICE Act. While no law is perfect, we cannot have a massive rollback of the significant protections that were put in place in the Dodd Frank Act following the financial crisis. I also believe it is important to preserve the orderly liquidation authority currently in the Dodd Frank to have the appropriate tools and knowledge-based regulators available.
Because of galvanized Democratic opposition, the CHOICE Act Luetkemeyer helped move through committee will have a tough time getting congressional approval. Republicans don’t have the votes to pass it through the Senate.
Still, Luetkemeyer’s committee recently held a hearing on what has been dubbed the CHOICE Act 2.0. Luetkemeyer says it has “improvements and tweaks, some things that we saw that we needed to do different or better”.