House Financial Services Committee Assesses Dodd-Frank Implementation on its Fourth Year Anniversary
This morning, the House Financial Services Committee (“Committee”) held a hearing to examine implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) four years after its enactment into law. The main focus of the hearing assessed whether Dodd-Frank had effectively eliminated “too-big-to-fail” for large banks. However, Members of Congress and witnesses also debated three issues important to SFIG members:

1, Risk retention and residential mortgage-backed securities (“RMBS”): Barney Frank, former Committee Chairman, Dodd-Frank sponsor and a witness at the hearing testified that the intent of the law was to create three categories for mortgages: those that fall below qualified mortgage (“QM”) standards, those that meet QM standards and should be subject to risk retention, and those mortgages that were “virtually certain to be repaid” and would be exempt from risk retention. On the other hand, Dale Wilson, Chairman and Chief Executive Officer of the First State Bank of San Diego, Texas testified that as a result of the QM rules, “our bank no longer makes mortgage loans,” because the risk of penalties as well as the “ability-to-repay” standard are too high to originate mortgages in his community.
2, Regulatory uncertainty: Anthony Carfang, a partner of Treasury Strategies, Inc. testified that the rollout of Dodd-Frank is hindering lending to the real economy. “The rollout, rule writing and implementation of Dodd-Frank created a climate of uncertainty of enormous proportions. In turn, this has led to a culture of indecision that is choking the U.S. economy and paralyzing American businesses and financial companies that had nothing to do with the financial crisis.”
3, Designating asset managers as systemically important financial institutions (“SIFIs”): “Asset management firms should not automatically be designated systemic,” stated Frank.

While Ranking Member Maxine Waters (D-CA) defended Dodd-Frank, Chairman Jeb Hensarling (R-TX) stated that the law was based upon a “false premise that somehow deregulation or lack of regulation led us into the crisis.” After the August Congressional recess, the Committee is expected to continue its oversight of Dodd-Frank implementation.
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