A New Approach to Financial Regulation
April 26, 2017 / Source: Financial Services Committee
The United States has a rich history of bank crises. In fact, we’re number two in the world, with 13 all-time, just behind France with 15, and just ahead of the United Kingdom, with 12. Our first major banking regulation law, the National Currency Act, was passed in 1863 as a response to a bank failure rate of fifty percent. Each successive crisis, the Panic of 1907, the Great Depression, the Savings and Loan Crisis of 1982, the Housing Bust of 2007 (to name a few) triggered a new wave of financial regulation. Dodd-Frank, passed in early 2010, is the latest of these waves.
There’s a saying in the military that generals spend a great deal of time fighting the last war. It strikes me, looking at the historical pattern, that this is also true of financial regulators. They pass laws and make changes based on what happened last time, but the next crisis is always based on a new systemic weakness that no one sees. Dodd-Frank builds on this history by adding major new regulations that create massive compliance costs while keeping the same problems that led to the crisis in the first place.
I came to Congress a little over four months ago. If I leave Washington having helped put through a law that will break the bailout, regulate, rinse, repeat cycle, I will consider the time away from home well spent. I serve on the Financial Services Committee, and we’re working on a bill that I think will go a long way towards stopping the bailouts, while at the same time cutting back on the Dodd-Frank red tape that’s been slowly strangling community banks.