Rep. Mia Love: Bring on the CHOICE Act -- a common sense alternative to Dodd-Frank

Close up picture of credit card puted on dollars

Eight years ago, the nation experienced the worst financial crisis in 80 years, which cost millions of Americans their savings, their homes, and their jobs. The response – one that was well-intended, but overly broad -- expanded the federal government’s footprint in our lives and inadvertently left us more vulnerable to the next crisis.

Since the passage of the Dodd-Frank Act in 2010, regulators have promulgated thousands of pages of regulations, saddling America’s banks with compliance costs that have reduced the services they can offer and increased the fees they charge.

The average American now pays $118 per year in checking fees and the account balances needed to qualify for free-checking have tripled, from $250 to $750. As a result, approximately 1 million people – mainly low-income families – have joined the ranks of the unbanked.

Meanwhile, we continue to hear the stories of small banks having to hire more compliance officers than lending officers – and even buckling under the weight of new regulations.

According to FDIC data, since 2010, more than 2300 community banks have either closed or been forced to merge, at a rate of 60 per quarter – and 16 percent of our remaining community banks have stopped or plan to stop making mortgages as a result of Dodd-Frank. Fewer banks means diminished access to capital – the capital needed to launch a new business, expand an existing business, or buy a home.

The average American now pays $118 per year in checking fees and the account balances needed to qualify for free-checking have tripled, from $250 to $750. As a result, approximately 1 million people – mainly low-income families – have joined the ranks of the unbanked.

It is no coincidence that economic growth has been an anemic 2.2 percent since 2010 – the worst post-recession recovery on record. A return to the healthy growth rate of 3.5 percent annually that the U.S. economy enjoyed for a half a century following World War II would mean more jobs, more opportunity, and higher wages.

That’s why House Republicans, led by Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, on which I’m proud to serve, have introduced the Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs (CHOICE) Act.

This common sense alternative to Dodd-Frank represents a fundamental break from the overregulation and micro-management of banks by Washington bureaucrats in favor of strong capital and the freedom to serve the financial needs of American households and businesses.

The CHOICE Act rests on the following sound principles:

? Every American must be afforded the opportunity to achieve financial independence.

? Consumers must be protected from financial fraud, but also from the loss of economic liberty.

? Taxpayer bailouts of financial institutions must end and no company must ever be considered too-big-to-fail.

? Economic growth for all must be revitalized through competitive, transparent, and innovative capital markets.

? Simplicity must replace complexity, because complexity can be gamed by the well-connected or abused by the powerful.

? Both Wall Street and Washington must be held accountable, and the financial futures of Americans should not be subject to the political environment.

Pursuant to these basic principles, the CHOICE Act’s foundation is the understanding that plentiful bank capital is the cornerstone of a strong, healthy, and resilient financial system ready to effectively and reliably fuel the financial needs of a robust economy.

The CHOICE Act offers the nation’s banks a choice: in exchange for holding capital amounting to at least 10 percent of their total assets – a ratio significantly higher than what is currently required – banks would be exempted from the Dodd-Frank regulatory regime as well as a number of other regulatory burdens that pre-date Dodd-Frank.

To avail themselves of the CHOICE option, most big banks would have to raise a significant amount of capital. Community banks, by contrast, are already generally well-capitalized and would have to raise little to no capital in order to shed constricting regulations.

The financial system is the economy’s cardiovascular system, circulating the lifeblood of capital and credit to our businesses and families.

To achieve the rates of economic growth that hard-working American families need and deserve, we need a financial system that is strong, resilient, and innovative.

The CHOICE Act will bring us closer to that goal.