November 09, 2011
Sends Letters to Financial Regulators and GAO
JOHNSON CONTINUES STRONG OVERSIGHT OF FINANCIAL REFORM
Sends Letters to Financial Regulators and GAO
WASHINGTON – The recent financial crisis devastated our economy: millions of Americans lost their jobs, their homes, or their savings. As a response to the worst financial crisis since the Great Depression, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to address regulatory gaps and establish vital new safeguards for consumers, investors, and taxpayers.
As Chairman of the Senate Banking Committee, Senator Tim Johnson (D-SD) is committed to ensuring the oversight of the implementation process is conducted thoughtfully. In this role, Chairman Johnson has held frequent oversight hearings, worked closely with the financial regulators, and defended the new law from attempts to repeal or weaken the protections it established.
Today, Chairman Johnson sent a letter to financial regulators and a letter to the Government Accountability Office to ensure Wall Street reforms are implemented well and that the true costs from the financial crisis are not forgotten.
Text of the full letters follows, scans available on request:
November 9, 2011
The Honorable Gene Dodaro
U.S. Government Accountability Office
441 G Street, NW
Washington, DC 20548
Dear Mr. Dodaro:
As Chairman of the Senate Banking Committee, a top priority for me has been strong oversight of the implementation of the Wall Street Reform and Consumer Protection Act, which Congress enacted in response to the worst financial crisis since the Great Depression. Repealing or undermining these Wall Street reforms, as some have proposed, would take us back to the same weak financial system that led to the worst economic crisis in generations and whose painful costs continue to devastate many Americans. Systemic risks would remain unsupervised. Consumers would have no focused watchdog looking out for them. Investors would be exposed to more Ponzi schemes. Reckless financial firms would undermine those who played by the rules. Taxpayers would be on the hook for more bailouts.
We simply cannot afford to go back to the old financial system that destroyed millions of jobs and cost the economy trillions of dollars. To do so would be dangerous and irresponsible. As financial regulators continue to implement the Wall Street Reform Act through numerous rules with varying degrees of economic impact, we must step back and look at the whole picture, remembering why these rules were necessary in the first place. In one of our oversight hearings earlier this year, Phil Angelides, the chair of the Financial Crisis Inquiry Commission (FCIC), testified before our Committee, saying:
“[T]he financial crisis has been of no small consequence to our nation. There are more than 24 million Americans who are out of work, cannot find full time work, or have given up looking for work. About four million families have lost their homes to foreclosure and millions more have slipped into the foreclosure process or are seriously behind on their mortgage payments. Nearly $9 trillion in household wealth has vanished. The budgets of the federal government and of state and local governments across the country have been battered by the economic tailspin precipitated by the financial meltdown. And, the impacts of the crisis are likely to be felt for a generation, with our nation facing no easy path to renewed economic strength.”
To aid in the Committee’s oversight work and to inform future rulemaking processes, I respectfully request that GAO conduct a study of the aggregate costs of the financial crisis to ensure Congress and the American people have a full economic perspective of regulations implementing the recent Wall Street reforms. Specifically, please report on the quantitative and qualitative impacts of the recent financial crisis, including, but not limited to: mass unemployment and its effects; cyclical losses of output; longer-term losses of output caused by reduced capital accumulation, the destruction of human capital, and other effects caused by the downturn; the destruction of household wealth; and effects on federal, state and local governments. Please also consider the benefit of the emergency actions taken by the federal government to mitigate further damage to the U.S. economy and stabilize the U.S. financial system. Additionally, please consider the aggregate qualitative and quantitative benefits of the Wall Street Reform Act, including those measures that will prevent future crises, ensure timely and effective responses to risks to the financial system, and restore confidence in global markets.
Thank you for your examining this important topic, and I look forward to the report.
November 9, 2011
The Honorable Ben Bernanke
Mr. Raj Date
The Honorable Martin Gruenberg
Mr. Edward DeMarco
The Honorable Debbie Matz
Mr. John Walsh
The Honorable Gary Gensler
The Honorable Mary Schapiro
Dear Chairmen, Directors, and Advisor:
As you know, the key to designing and maintaining effective financial rules is taking a smart regulatory approach that, over the long run, provides the greatest benefit at the lowest cost to society as a whole. This approach should promote public participation and consider a wide range of factors for each rule you write. It should also ensure that new and existing regulations work together in concert to provide clear direction to those entities you supervise, as well as provide robust safeguards for those whom the rules are designed to protect.
We must not forget that our economy suffered from inadequate regulations that contributed to the worst financial crisis since the Great Depression. American families and small businesses bore tremendous costs in lost jobs, homes, and savings. In response, Congress enacted the Wall Street
Reform and Consumer Protection Act to address regulatory gaps and enhance protections for consumers, investors, and taxpayers while ensuring our financial markets remain the envy of the world. The long-term success of these reforms depends upon your agencies crafting clear, effective and robust financial regulations that build a stronger foundation for sustainable economic growth.
Efforts to repeal or undermine these new Wall Street reforms threaten the stability of our financial system at a time when we can least afford it. These efforts to slow down Wall Street reform prevent responsible businesses, including community banks and credit unions, from having the certainty they deserve with finalized rules that fully honor Congressional intent behind the new law. To ensure the Wall Street Reform Act continues to be implemented thoughtfully and responsibly with full consideration of relevant issues, we respectfully ask that you send us a written response to the following requests:
1. Provide a detailed description of your agency’s rulemaking process, including the variety of economic impact factors considered in your rulemaking. Please note to what degree you consider the benefits from your rulemaking, including providing certainty to the marketplace and preventing catastrophic costs from a financial crisis. Also describe any difficulties you may have in quantifying benefits and costs, as well as any challenges you may face in collecting the data necessary to conduct economic analysis of your rulemaking.
2. Provide your agency’s current and future plans to regularly review and, when appropriate, modify regulations to improve their effectiveness while reducing compliance burdens. Please include a description of actions your agency has taken, or plans to take, to streamline regulations; for example, the Consumer Financial Protection Bureau’s “Know Before You Owe” effort drastically simplifies mortgage and student loan disclosure requirements. Also note statutory impediments, if any, that prevent your agency from streamlining any duplicative or inefficient rules under your purview.
3. Provide details of how your agency encourages public participation in the rulemaking process, including through administrative procedures, public accessibility, and informal supervisory policies and procedures.
4. Provide details of how your agency addresses the unique challenges facing smaller institutions when dealing with regulatory compliance, including any related advisory committees your agency may have or other opportunities for small institutions to be heard by your agency. Please also detail how your agency responds to concerns raised by small institutions.
5. Describe how regulatory interagency coordination has improved since the creation of the Financial Stability Oversight Council established by the Wall Street Reform Act. Provide specifics of how coordination has helped, either formally or informally, in your rulemaking process.
Strong financial regulations will greatly benefit the American people for generations to come. Robust and efficient regulations will provide greater certainty to the marketplace, and will restore the business and consumer confidence necessary for economic growth. They will also provide greater clarity to American consumers and investors so that they are empowered to make sound financial decisions. Thank you for your consideration, and we look forward to working with you.
Next Article Previous Article