WASHINGTON – Seated under a painting of former Rep. Barney Frank, Republican Rep. Patrick McHenry attacked Frank’s signature financial reform legislation at a hearing on the growth of federal regulation and its impact on the international markets.
Witnesses criticized various financial regulations at the House Financial Services Oversight and Investigations subcommittee hearing on Wednesday. But one of them called for stronger regulation both domestically and globally.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law in July 2010 in response to the 2008 financial crisis. Co-authored by Frank, D-Mass., and former Sen. Chris Dodd, D-Conn., the law aims to regulate the derivatives market and also created the Consumer Financial Protection Bureau.
“If the goal was to make the U.S. markets less crisis prone, we need to rethink our strategy,” said Louise Bennetts, a regulation specialist at the libertarian-leaning Cato Institute.
Frank’s portrait hangs in the committee room because he is former chairman of the Financial Services Committee. McHenry, R-N.C., who presided Wednesday, is the current chairman of the panel’s oversight and investigations subcommittee.
Members of the subcommittee questioned the witnesses on financial regulations ranging from how banks should maintain capital, to risky small business loans from non-bank financial institutions.
Rep. Michael Fitzpatrick, R-Pa., worried that American businesses operating abroad could face retaliation from regulators overseas because of excessive American regulations on foreign firms doing business in the U.S. Bennetts said that could happen.
Rep. Emanuel Cleaver, D-Miss., using football analogy, said that regulations “make the game safer” and that Americans don’t choose their sports rules based on regulations in Europe or Asia.
Michael Barr, a professor at University of Michigan Law School, agreed that “strong regulations make the game safer for American families.”
Peter Wallison, a fellow at the conservative American Enterprise Institute, countered that regulations make the game safer, but Dodd-Frank is simply a bad law.
As the hearing rushed to a close because the members were called to the House floor for a vote, Rep. Al Green, D-Texas, quizzed Wallison on his response, questioning what the think tank fellow wanted government to do in 2008 with the economy teetering.
“I assume you agree that there are times when we need additional laws, it’s not simply a case of repealing laws?” Green asked.
“Regulation is necessary in some respects but it can be overdone,” Wallison said. “In principle, you might not have enough regulation.”