R Street scholar says CHOICE Act represents win for transparency, economic growth
WASHINGTON (April 26, 2017) – The Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs Act, better known as the Financial CHOICE Act, would represent major progress for the financial system, for constitutional government and for financing economic growth, R Street Distinguished Senior Fellow Alex J. Pollock testified today to the House Financial Services Committee.
Sponsored by Financial Services Committee Chairman Jeb Hensarling, R-Texas, the bill is best known for its provision to allow banks with a tangible leverage-capital ratio of 10 percent or more to see reductions in onerous and intrusive regulations imposed by the Dodd-Frank Act. Pollock praised that provision, noting that many aspects of the law—passed in the wake of 2008 financial crisis—represented legislative overreactions that expanded regulatory bureaucracy in harmful ways.
“This was in spite of the remarkably poor record of the government agencies, since they were important causes of, let alone having failed to avoid, the housing bubble and the bust,” Pollock said. “Naïve faith that government bureaucracies have superior knowledge of the financial future is a faith I do not share.”
Pollock also praised aspects of the CHOICE Act designed to improve regulatory transparency and accountability, including subjecting all regulatory agencies to the congressional appropriations process; requiring agencies to conduct cost-benefit analyses of promulgated rules, which would themselves be subject to review by a newly formed Chief Economists Council; and subjecting the Federal Reserve to quarterly reviews by Congress.
“I would like to suggest an additional requirement for these reviews. I believe that the Federal Reserve should be required to produce a Savers Impact Statement, quantifying and discussing the effects of its monetary policies on savings and savers,” Pollock said.
Pollock also praised elements of the bill designed to bring greater transparency to the Financial Stability Oversight Council. He proposed the bill should go further by requiring the secretary of the Treasury, who serves as the council’s chair, to deliver regular reports to Congress on emerging risks to the financial system identified by FSOC.
“Forecasts of the unknowable financial future are hard to get right, needless to say, but I believe a unified, single assignment of responsibility for communications with Congress of the best available risk assessments would be a good idea,” Pollock said.
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