Far-reaching legislation intended to remake the nation’s financial regulatory system is “holding up very well” despite efforts to undermine new rules and underfund the agencies implementing them, one of the bill’s authors said Monday.
In a speech at the National Press Club to mark the one-year anniversary of the financial overhaul, Rep. Barney Frank (D-Mass.), ranking member of the House Financial Services Committee, criticized Republicans for trying to weaken the legislation that he and former Sen. Christopher J. Dodd (D-Conn.) shepherded through Congress last year. But Frank said those efforts have largely fallen short.
“My Republican colleagues, unlike [with] climate change and health care, don’t want to take this one head-on, because it is still too popular,” Frank said.
GOP lawmakers have argued that the Dodd-Frank bill— which includes the creation of a Consumer Financial Protection Bureau, oversight of the vast derivatives market and heightened regulation for large, interconnected financial firms, among other provisions — has caused uncertainty for businesses and impeded economic recovery.
Efforts to repeal parts of the bill have gained little traction, given that Democrats control the Senate and the White House. But House GOP members have made attempts to scale back certain elements and slow hundreds of new regulations.
They have passed measures to delay new derivatives rules and to have the CFPB overseen by a five-member commission rather than an independent director. Republicans also have declined to fund the Securities and Exchange Commission and the Commodity Futures Trading Commission at levels that the leaders of those agencies argue are needed to fulfill their expanded duties under Dodd-Frank.
Frank said he views those efforts and others primarily as a political fight.
“I do not see this [opposition] coming from the financial industry,” he said. “This is coming from the ideologues in the Republican party who just believe, despite all the evidence to the contrary, that an unregulated free market works.”
Opponents argue that Frank and his legislation went too far, burdening the industry with too many layers of regulation. In an opinion piece in Politico on Monday, House Financial Services Committee chairman Rep. Spencer Bachus (R-Ala.) called Dodd-Frank a “roadblock to our nation’s recovery.”
Frank said another frustrating development has been the assault — not just from Republicans, but also from some Democrats, consumer groups and the mortgage industry — on the “risk retention” requirements in Dodd-Frank.
The bill requires lenders making certain types of mortgages to retain a stake in those loans, an effort designed to avert a repeat of the mortgage market meltdown. In the past, many lenders sold the loans they originated, which were later resold as securities. The original lenders were therefore off the hook if the loans went bad. “The single biggest cause of all this was the ability of people to make mortgage loans with neither regulation nor risk,” Frank said.
Many firms have argued that the requirements being considered by regulators would translate into higher interest rates for borrowers, effectively shutting millions of families out of homeownership. Frank acknowledged that the new requirements should be waived in certain cases, such as when borrowers make large down payments, but he said that “should be the exception, not the rule.”
Frank also criticized the White House’s failure to make nominations to key regulatory posts, particularly at the new consumer bureau. While Republicans have said they will not confirm anyone for that position without significant changes to the bureau, Frank said President Obama should be willing to use a recess appointment to fill important posts.