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House Republicans moved two bills through committee on Wednesday that would each roll back key provisions of the Dodd-Frank Act.
April 13 -
With agencies created by the Dodd-Frank Act embroiled in court battles and continued questions dealing with "too big to fail," can anyone honestly say the reform law is working?
May 4 -
In a ruling that was unsealed Thursday, D.C. District Court Judge Rosemary Collyer upbraided the Financial Stability Oversight Council for disregarding its own rules in its decision to designate the insurer MetLife as a systemically risky nonbank.
April 7 -
The Federal Reserve voted Tuesday to consider a proposal that would limit counterparties' contractual rights to early payment in the event of a big bank default rights that industry groups have argued reach too far.
May 3
The financial services industry has been battered by bad law, but worse by an administrative regime on steroids.
The economic malaise — highlighted by an April
The problem is that the regulatory agencies have abused their role to implement financial policy to actually make financial policy, usurping the role given to Congress in our tripartite constitutional system. In some cases, this is because Dodd-Frank allowed the regulators too much latitude to interpret the law or fill in specifics where the law was too broad. But in other cases, regulators are simply exceeding their authority, thereby making a mockery of our separation of powers.
And it's not just conservatives and pro-business voices who are worried. Concerns about the administrative state cut across the ideological divide. Jonathan Turley, a liberal George Washington University law professor, has
Administrative absolutism is gaining ground.
In February, the Federal Deposit Insurance Corp.'s acting inspector general
Until March, the Financial Stability Oversight Council enjoyed what seemed like unfettered authority to dub financial organizations "systemically important" and subject to the Federal Reserve's special prudential supervision. In a rare show of defiance, MetLife challenged its SIFI designation. Judge Rosemary Collyer of the U.S. District Court for D.C. sided with MetLife,
There are many other examples.
The banking industry may have
No agency is more absolutist than the Consumer Financial Protection Bureau. It writes its own budget drawing funds from the Fed. CFPB Director Richard Cordray runs an agency with powerful discretion to rule any consumer financial product is unfair, deceptive or abusive. The problem, however, isn't Cordray. If an ideological clone of House Financial Services Committee Chairman Jeb Hensarling were the bureau's director, its consolidated power would still be problematic.
Dodd-Frank expressly bars the CFPB from regulating auto dealers' finance programs. In its overreaching enforcement of
Yet legislative efforts to rein in the CFPB thus far have failed.
In April, the House Financial Service Committee voted along party lines, 33 to 20, for a bill bringing the bureau into the congressional
Bringing administrative agencies to heel shouldn't be partisan. Congress makes law. Agencies are supposed to be servants of the law. Moreover, Dodd-Frank was passed by Democrats. In the Senate only one Democrat, Russ Feingold of Wisconsin, voted against it. Banning the CFPB from regulating auto dealers' finance programs is law because of congressional Democrats. They should be incensed the bureau flagrantly flouted their will and that of the legislative branch.
Unfortunately, neither of the top presidential candidates appears willing to reverse this trend. Similar to President Obama, likely Democrat presidential nominee Hillary Clinton is a proponent of using administrative agencies to advance policies that can't clear Congress. While presumptive Republican presidential nominee Donald Trump has decried Dodd-Frank's economic impact, he evinces little interest in structural separation of and checks on power. Both Clinton and Trump believe in a presidential royal prerogative at odds with Madisonian checks and balances.
What's to be done?
The financial services industry must more vigorously defend itself against regulatory policymaking and outright lawlessness in the courts and the political arena. The courts must step up. And Congress needs to stiffen its spine and reassert its institutional prerogative.
Eric Grover is principal at Intrepid Ventures, a corporate development and strategy consultancy advising payment issuers, networks and processors, and other payments companies.