Like many Americans, I hoped that Republican presidential nominee Mitt Romney would use the opportunity of the first presidential debate to speak thoughtfully to the American people about his plan for Wall Street reform.
Because, to date, the Romney-Ryan ticket has been equal parts incoherent and dishonest in characterizing the Dodd-Frank Act so far during the campaign.
Back in August, Governor Romney lauded most of the major provisions in the Wall Street Reform and Consumer Protection Act -- including enhanced capital requirements, limits on leverage, risk retention, derivatives regulation and tighter standards for mortgage lending -- while saying he wanted to repeal the bill. And back in May, before he was selected by Romney as the vice presidential nominee, Paul Ryan seemed to accidentally endorse the Volcker Rule -- a common-sense measure that would stop speculative trading and investments in hedge funds by banks that have access to the federal safety net -- though Ryan voted against Wall Street reform, which included Volcker.
But unfortunately, the Republican ticket continued its incoherence on financial reform with Romney's comments last night. While Governor Romney conceded that he supports the provision in the Wall Street Reform Act that will discourage banks from extending the types of exotic loans that contributed to the recent crisis, he then went on to blast the Consumer Financial Protection Bureau (CFPB) for not yet finalizing this "qualified mortgage" rule. For someone whose own housing plan called for "sensible" financial regulation and a "new era of responsible lending," it seems unfair for the Governor to criticize the CFPB for taking the time to get this critical regulation right. And it's even more disingenuous for Romney to blast the CFPB given that his top economic advisor has suggested that the Governor might dismantle the bureau if he were to become president, and that his running mate, Paul Ryan, has led the GOP's charge in Congress to gut the agency's funding and limit its independence.
Moreover, Romney offered a willfully misleading criticism of the Wall Street reform bill as "[designating] a number of banks as too big to fail, [so that] they're effectively guaranteed by the federal government."
If Mr. Romney is right that these banks are getting a blank check from America's taxpayers, shouldn't they all be clamoring to be designated a "systemically important financial institution," or a SIFI? Well, as someone with a front seat for this debate here in Congress, I can tell you that isn't happening. Instead, large financial institutions are fighting the SIFI designation with the full force of their lobbying operations, because they know what Governor Romney doesn't: being identified as a SIFI means being subject to regulation above and beyond current requirements, including "living wills" that will help regulators plan how to wind down the firms in an orderly fashion in the event they become insolvent.
In fact, former FDIC Chairman Sheila Bair, a Republican appointee, noted in Congressional testimony last June that "many institutions are vigorously lobbying against such a designation" and that "being designated a SIFI will in no way confer a competitive advantage by anointing an institution as too-big-to-fail."
Now, Romney's Republican colleagues in the House have actually recognized that this new, enhanced SIFI supervision will change the way that the biggest banks and non-banks alike conduct their operations. In fact, some of his colleagues are now advocating exemptions to this rule that would allow huge insurance companies, like AIG, to avoid stricter regulation precisely because they know this provision will change their ability to do business-as-usual.
As someone who worked hard with my Democratic colleagues and President Obama on the most sweeping financial reform since the Great Depression, it's difficult for me to hear Mitt Romney so blatantly mischaracterize our work. If the Governor wants to replace Dodd-Frank, he should come forward and be specific. But his current distortions of the law don't serve the American people, who have already paid the price for the bailouts and unemployment caused by the financial crisis.
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