The Financial Choice Act (H.R. 10)


The 2008 financial crisis was the greatest threat to the American economy since the Great Depression of 1929. The bankruptcy of Lehman Brothers — the largest in U.S. history — followed by massive taxpayer bail-outs of other financial institutions helped prevent a potential collapse of the world financial system. Still, home prices in the U.S. fell by 31.8%, and 2.6 million Americans lost their jobs. In response, Congress passed the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act, which put forward a series of reforms that were specifically designed to curb risky behavior by banks, help protect consumers, and safeguard the U.S. financial sector from future financial crises.

This week, the House passed the Financial Choice Act (H.R. 10), effectively gutting the most crucial elements of the Dodd-Frank Act and placing the U.S. on track to return to the pre-2008 era of unchecked and risky financial market practices. Specifically, this legislation would:

• Weaken the tests banks are forced to undergo to prove that they have the assets to withstand another financial crisis;

• Repeal the government’s “orderly liquidation authority” to safely resolve failing banks in the event of another market failure and avoid the need for tax payer-funded bailouts;

• And limit the authority of the Securities and Exchange Commission to prosecute bad actors in the securities industry for crimes such as fraud.

What is most troubling, however, is the impact this bill would have on consumer protection. Dodd-Frank created the Consumer Financial Protection Bureau (CFPB) to serve as an independent agency dedicated solely to protecting consumers from the same predatory behavior that ignited the subprime mortgage crisis. This legislation will significantly weaken the CFPB’s independence and enforcement abilities, leaving consumers — like the soldiers and veterans who last year submitted over 44,000 complaints to the agency — vulnerable. The Financial Choice Act will also prevent the Department of Labor from requiring that financial advisers disclose conflicts of interest to their clients before advising them on how to invest for retirement.

Ultimately, the issue of protecting consumers from predatory financial behavior, and this country from another economic meltdown, should transcend politics. Some aspects of Dodd-Frank may demand further review, but we owe it to our fellow Americans to work together on a set of regulations that promote fair and healthy markets and prevent future threats to the American economy.