The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation that I voted for and was signed by President Obama in 2010. The Act's numerous provisions, spelled out over thousands of pages, were scheduled to be implemented over a period of several years and intended to decrease various risks in the U.S. financial system. Was it perfect? Of course not. No massive piece of legislation is perfect, whether it was Tax Reform in 1986 or the Affordable Health Care Act in 2010 -- and that's why we constantly work to improve the law.
I proudly fought for the passage of Dodd-Frank. It ended "too big to fail," ensured that taxpayers will never be on the hook for another taxpayer-funded rescue of Wall Street, and put more financial cops on the beat. But three years after enactment of the Dodd-Frank law, during comprehensive review and oversight, leading financial reform crusaders like former Rep. Barney Frank, former Federal Reserve Chairman Ben Bernanke and former FDIC Chair Sheila Bair argued that there were problems with the bill that needed to be addressed.
I joined many of my House Democratic colleagues to modify Section 716 of the bill -- a move supported by Rep. Frank in 2012 and a majority of House Democrats on the Financial Services panel during Committee passage. For the Financial Services committee vote, my good friend, Ranking Member Maxine Waters, did not issue a vote recommendation.
HR. 999 the Swaps Regulatory Improvement Act addressed problems with section 716 of the Dodd-Frank Act which essentially prohibit all insured depository institutions from acting as a swap dealer or a major swap participant -- even when the institution acts in these capacities to serve the commercial and hedging needs of its customers or to hedge the institution's own financial risks. It passed the House Financial Committee by a 56 to 6 vote.
Chairman Bernanke believed that the provision should be changed. He stated, "Forcing these activities out of insured depository institutions would weaken both financial stability and strong prudential regulation of derivative activities." And that it was not needed. He said, "Banks conduct their derivatives activities in an environment that is subject to strong prudential Federal supervision and regulation, including capital regulations that specifically take account of a bank's exposures to derivative transaction."
Let's be clear about one thing, this bill did not weaken Dodd-Frank. If it had, I do not believe that Rep. Frank would have supported the same bill in the 112th Congress, where it passed the full House 357-36. In fact, Barney Frank remarks during the markup of the same bill in the 112th Congress are especially illustrative:
And I hope this amendment is adopted, that the bill is then passed, and I just want to reassure people, passing this bill -- particularly as amended -- will not in any way, shape or form reduce sensible regulation of derivatives. It will not increase any exposure to the financial system from derivatives. It was an unnecessary and, I think, somewhat unwise amendment. The bill before us, particularly as amended, will restore this to what I think is the appropriate balance. And I am appreciative of both the members, the gentlewoman from New York, Ms. Hayworth, and the gentleman from Connecticut, Mr. Himes, for working this out for us.