Today marks one year since the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was signed into law. One year since Rep. Barney Frank (D-MA) and former Senator Chris Dodd (R-CT) chose to ignore our concerns that this bill would stifle the recovery, harm job creation and crush Main Street America. One year since the former Speaker Pelosi- and Leader Reid-controlled Congress rammed this bill through the House and Senate with almost no Republican support, unleashing a tidal wave of new regulations on an economy already buckling under overregulation.
Unfortunately, one year later, the promises that this legislation would help restore our fiscal stability and confidence and grow our economy remain largely unfulfilled and many of our worst fears have come true.
The few effective provisions of Dodd-Frank are masked by its many flaws; flaws that have been and will continue to be detrimental to the American economy and our financial future if not reversed. As Chairman of the House Committee on Small Business, I am particularly concerned about the impact these flaws will have on small firms across America. Small companies are the cornerstone of the American economy and are our most effective job creators. On average, seven of every ten new jobs are created by small businesses.
The impact of Dodd-Frank on small businesses is two-fold. First, Dodd-Frank is having a tremendous impact on small business lending. In the last few years, lending to small firms has plummeted to record lows. The stricter regulatory environment created by Dodd-Frank, and the new Consumer Financial Protection Bureau (CFPB), combined with the uncertainty brought by many of the laws’ vague provisions, is slowing small business lending. Access to capital is critical for small business success and crucial to our economic recovery. Without access to capital, many small companies are not able to maintain operations, let alone expand and create new jobs. With unemployment hovering at over 9 percent we should be doing more to make credit available to our job creators, not stifling lending with new regulations.
Further, small financial institutions are disproportionately affected by Dodd-Frank. Many small businesses rely on small financial institutions, like credit unions and community banks, to meet their capital requirements. Without them, these small businesses would have to close their doors. Small lending institutions lack the capability of their larger counterparts to hire the additional manpower necessary to deal with the hundreds of additional regulations created by Dodd-Frank. The increase in costs associated with these new regulations will lead to a decrease in revenue and will reduce small banks’ ability to meet the credit requirements of their communities.
In a recent House Small Business Committee hearing, Thomas Boyle, Vice-Chairman of a small bank in LaGrange, IL conveyed this sentiment by saying, “I am deeply concerned that this [Dodd-Frank] model will collapse under the massive weight of new rules and regulations… these pressures are slowly but surely strangling traditional community banks, handicapping our ability to meet the credit needs of our communities. The consequences are real. Costs are rising, access to capital is limited, and revenue sources have been severely cut. It means that fewer loans get made. It means a weaker economy. It means slower job growth.”
To help address the consequences of Dodd-Frank and the CFPB, House Republicans will seek to pass a bill today that would bring much needed oversight to the Bureau. The Consumer Financial Protection Safety and Soundness Improvement Act of 2011 (H.R. 1315) would replace the Bureau’s director, which is an unelected, unaccountable bureaucrat who has sweeping powers, with a 5-member bipartisan commission. The legislation would establish a meaningful review process of CFPB rules that may endanger the safety and soundness of small financial institutions. A bipartisan commission would promote certainty and continuity by preventing a new director from unilaterally reversing earlier decisions, and would carry out regulatory initiatives in a manner that is consistent with the safety and soundness of the country’s financial system.
Over the past year, Dodd-Frank has done the opposite of what President Obama, Rep. Frank and Sen. Dodd promised. Lending remains restricted, unemployment is stagnant and small business owners are more uncertain than ever about the state of the economy. Further, Dodd-Frank’s impact on small businesses has impeded the nation’s economic recovery, killing job growth and stifling innovation. Next Thursday, we will continue our oversight of this burdensome law when our Subcommittee on Investigations, Oversight and Regulations examines the impact of the CFPB on small businesses in a hearing. House Republicans are committed to reverse the harmful provisions in Dodd-Frank so that small businesses and lenders can thrive responsibly and spark growth in our economy.