Some anniversaries are better left uncelebrated and the one-year anniversary of the enactment of the 2010 Dodd-Frank Act is certainly one of them. Of all the federal government’s confidence killers over the past several years—from the failed “stimulus” package to the government takeover of health care—the Dodd-Frank Act ranks right with them as a barrier to job creation.
Last July, before President Obama signed the massive 2,300-page bill into law, its Democratic supporters promised the American people that Dodd-Frank would “increase investment and entrepreneurship” and “foster competitiveness, confidence in our financial sector, and robust growth in our economy.”
It has not.
Just this past week, in a politically-charged op-ed in the Wall Street Journal, Treasury Secretary Tim Geithner touted Dodd-Frank’s contributions to our economy and said “the U.S. financial system is in much stronger shape” and that his department’s actions “helped to restart economic growth.”
One year after the bill Secretary Geithner said was “designed to lay a stronger foundation for innovation, economic growth and job creation” received his boss’ signature, how’s our economy really doing?
The facts speak for themselves. National unemployment has risen to 9.2 percent and 22 million Americans can’t find full-time work. More than 44 million Americans are now on food stamps. Entrepreneurship is trapped in a coma as new business creation has fallen to a 17-year low. The unofficial Misery Index, which measures unemployment and inflation rates, is at a 28-year high.
A House Financial Services Committee report issued last week found the overall budget cost of Dodd-Frank through fiscal year 2012 will be more than $1.2 billion, with an estimated 2,260,631 annual labor hours required to comply with the ten percent of the red tape that’s been issued so far.
Dodd-Frank was sold to the American people as an economic growth bill. Instead, the law emitted shockwaves of consequences—mostly intended—that threaten to slow growth and make our nation’s unemployment crisis even worse.
Instead of addressing the real flaws that led to the very real financial crisis, the law’s architects futilely sought to promote financial stability by eliminating any chance of risk in our economy. They failed to grasp what the American people know to be true: you cannot outlaw risk without losing reward, and you cannot achieve a stable economy by privatizing profits and socializing losses.
As any lawmaker ought to know, the right reforms to any problem must be based on the right diagnosis, and without that you cannot possibly hope to find the right cure. House Republicans were the first to introduce comprehensive reform to create certainty in the economy with fair application of the law by stopping the bailouts, ending “too big to fail,” and addressing one of the root causes of the crisis – Fannie Mae and Freddie Mac. Dodd-Frank failed to address these problems from the start.
In this era of high unemployment, nothing in the bill was designed to help create jobs. With at least three unintended consequences on each page, and an expected 2,800 government employees needed to enforce it, the only professions likely to benefit from its passage are lawyers and bureaucrats.
What was billed as a consumer protection measure in theory is, in practice, designed to limit consumer rights. Its provisions to ban and ration credit products are certain to make credit more costly and less available. Its derivatives title will potentially move trillions of dollars off shore, restricting the ability of local utilities to manage risk and further hampering job creation.
Dodd-Frank is not only anti-consumer and anti-creditor, but also anti-taxpayer. The Democrats claimed to end taxpayer-funded bailouts and “too big to fail” in the bill’s title, but failed to accomplish that in the actual law. And despite Secretary Geithner’s most recent claims, Dodd-Frank does not require any reform whatsoever of Fannie Mae and Freddie Mac, the two government-sponsored entities that have cost taxpayers billions and exposed them to trillions more in losses. If he truly believes in “winding down” these GSEs as he says he does, then he should support the legislation I introduced in March.
After the 2008 financial collapse and the widely unpopular TARP bailout that followed, Americans felt understandable antipathy toward Wall Street. Democrats felt empowered, and their plans to rein in Wall Street excesses and end the notion of “too big to fail” sounded appealing to many. But as the past couple years have taught us, good intentions and slick slogans don’t necessarily translate to sound public policy, job creation, and economic growth.
On its first anniversary, Dodd-Frank is nothing worth celebrating, and the nation can now see it for what it really is: a deadly cocktail of political favoritism, regulatory overreach, and radical measures that’s only succeeding in killing the confidence that job creators and job-seeking Americans so desperately need.
Rep. Hensarling serves as Chairman of the House Republican Conference and Vice Chairman of the House Financial Services Committee.