The Financial CHOICE Act of 2017
As of 7/13/2017, the Senate Banking, Housing, and Urban Affairs Committee has held hearings on the legislation after the bill was read twice before the entire Senate and referred to the Committee.
The Seven Principles
The seven key principles that form the basis of the Financial CHOICE Act are:
- End taxpayer bailouts of financial institutions, and eliminate Too Big to Fail;
- Hold both Wall Street and Washington accountable;
- Simplify regulation so it cannot be gamed or abused;
- Grow the economy through competitive, transparent, and innovative capital markets;
- Give every American, regardless of circumstance, the opportunity for financial independence;
- Protect consumers from fraud, deception, and the loss of economic liberty; and
- Manage systemic risk within a market based on profit and loss.
The House Bill:
What It Does
Ends Bailouts and Too Big to Fail
- Repeals Title II of the Dodd-Frank Act, and its Orderly Liquidation Authority, and replaces it with a new chapter in the Bankruptcy code that covers the failure of large, complex financial institutions.
- Retroactively repeals the authority of the Financial Stability Oversight Council (FSOC) to designate firms as Systematically Important Financial Institutions (SIFIs).
- Repeals Title VIII of the Dodd-Frank Act, which gives the FSOC authority to designate certain payments and clearing organizations as systemically important “Financial Market Utilities” (FMUs) with access to the Federal Reserve discount window, and retroactively repeal all previous FMU designations.
- Restricts the Federal Reserve’s discount window lending to Bagehot’s dictum, which states, as summarized by Bank of England Deputy Governor Paul Tucker: “to avert panic, central banks should lend early and freely (ie without limit), to solvent firms, against good collateral, and at high rates.”
- Prohibits the use of the Exchange Stabilization Fund to bailout financial firms or creditors.
Restores Wall Street Accountability
- Enhances penalties for financial fraud and self-dealing and promotes greater transparency and accountability in the civil enforcement process.
- Allows the SEC to triple the monetary fines sought in both administrative and civil actions where penalties are tied to the defendant’s illegal profits.
- Gives the SEC new authority to impose sanctions equal to investor losses in cases involving “fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement” where the loss or risk of loss is significant, and increase the stakes for repeat offenders.
- Increases the maximum criminal fines for individuals and firms that engage in insider trading and other corrupt practices.
- Remits all fines collected by the Public Company Accounting Oversight Board and Municipal Securities Rulemaking Board to the Treasury for deficit reduction.
FCA 2017 Links
--More Links Will be Added as the Bill Progresses--
Brown Statement on House Push to
Dismantle Wall Street
U.S. Sen. Sherrod Brown (D-OH), ranking
member of the Senate Banking, Housing, and Urban Affairs Committee, issued the following statement regarding the Financial CHOICE Act, which would dismantle the Dodd-Frank Wall Street Reform law:
This partisan, dangerous legislation would once again leave families, seniors, and service members at the mercy of predatory lenders, and put taxpayers back on the hook to pay for Wall Street’s greed and recklessness. Democrats have shown we’re willing to work with Republicans to tailor the rules where it makes sense, but not if it means killing the reforms that have made the financial system safer and fairer.
Further Reduces the Regulatory Burden by Adopting Other Regulatory Relief Bills
- H.R. 1116 – “Taking Account of Institutions with Low Operational Risk (TAILOR) Act” (115th)
- H.R. 766 – “Financial Institution Customer Protection Act” (114th)
- H.R. 1210 – “Portfolio Lending and Mortgage Access Act” (114th)
- H.R. 1941 – “Financial Institutions Examination Fairness and Reform Act” (114th)
- H.R. 4500 – “Community Bank Reporting Relief Act” (114th)
Reforms the CFPB to Help the American People Achieve Financial Independence.
- Changing the agency to the Consumer Law Enforcement Agency (CLEA), and tasking it with the dual mission of consumer protection and competitive markets, with cost-benefit analyses of rules performed by a newly-formed Office of Economic Analysis.
- Restructuring the agency as an Executive Branch agency with a single director, removable by the President at will, and making the agency subject to Congressional oversight and the normal Congressional appropriations process.
- Eliminating the CFPB’s supervisory function and holding it responsible for enforcing the enumerated consumer protection laws.
- Remove the agency’s opaque and ill-defined Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) authority.
- Establishing an independent, Senate-confirmed Inspector General.
- Eliminating the Agency's sweeping market-monitoring function and requiring it to obtain permission before collecting consumers’ personally identifiable information.
- Repealing the Department of Labor’s (DOL’s) fiduciary rule.
- Promoting new investment products and choices with a streamlined application process.
- Modernizing the corporate governance system to better promote value creation for public companies and their shareholders.
Restores Accountability for Washington Financial Regulators
- Makes all financial regulatory agencies subject to the REINS Act, which requires a congressional vote on federal regulations that would have a major economic impact, and places these agencies under congressional oversight. The exception to this is Fed monetary policy.
- Requires all financial regulators to conduct detailed economic analyses of all proposed and final regulations to ensure the costs are outweighed by the benefits.
- Reauthorizes the Securities and Exchange Commission (SEC) with funding, structural, due process, and enforcement reforms.
- Increases the transparency of financial regulations’ costs to state and local governments, and private sector entities.
- Requires public notice and comment for any international standard-setting negotiation.
- Institutes significant due-process reforms for every American who feels that they have been the victim of a government shakedown.
- Repeals the so-called Chevron doctrine, which says that if Congress hasn't addressed a matter, the agency's interpretation of a regulation or statute it administers is permissible and that it should be deferred to.
- Abolishes the Office of Financial Research (OFR).
- Prohibits the financial regulators and the Department of Justice (DOJ) from using settlement agreements to require donations to non-victims.Demands greater accountability and transparency from the Federal Reserve, both in its conduct of monetary policy and its prudential regulatory activity, by including the House-passed Fed Oversight Reform and Modernization (FORM) Act.
- Increases transparency and accountability in the Federal Reserve’s conduct of supervisory stress tests while streamlining duplicative and overly burdensome components.
- Institutes criminal penalties for leaks of sensitive, market-moving information related to the Federal Reserve’s stress test and living wills.
Allows Well-Run Institutions to Get Out from Under Burdensome Regulations.
- Providing an “off-ramp” from the post-Dodd-Frank supervisory regime and Basel III capital and liquidity standards for banks that maintain high levels of capital. Any banking organization that makes a qualifying capital election, but fails to maintain the specified non-risk weighted leverage ratio, will lose this regulatory relief.
- Exempting banking organizations that have made a qualifying capital election from any federal law, rule, or regulation that limits mergers, consolidations, or acquisitions of assets or control, to the extent the limitations relate to capital or liquidity standards, or concentrations of deposits or assets.
- Exempting banking organizations that have made a qualifying capital election from any federal law, rule, or regulation that permits a banking agency to consider risk “to the stability of the United States banking or financial system,” added to various federal banking laws by Section 604 of the Dodd-Frank Act, when reviewing an application to consummate a transaction or commence an activity.
Encourages Capital Formation, for Small Businesses, Innovators, and Job Creators.
- Repeal sections and titles of the Dodd-Frank Act, including the Volcker Rule, that limit or inhibit capital formation.
- Repeal the SEC’s authority to eliminate or restrict securities arbitration.
- Repeal the Dodd-Frank Act’s non-material specialized disclosures.
- Incorporate almost two dozen Committee or House-passed capital formation bills, including:
- H.R. 79 – “Helping Angels Lead Our Startups Act” (115th)
- H.R. 910 – “Fair Access to Investment Research Act” (115th)
- H.R. 1219 – “Supporting America’s Innovators Act” (115th)
- H.R. 1312 – “Small Business Capital Formation Enhancement Act” (115th)
- H.R. 3868 – “Small Business Credit Availability Act” (114th)