WASHINGTON — If the House Financial Services Committee's first hearing of the year was any indication, the panel's handling of banking-related legislation in the new Congress will be just as partisan as the last — if not more so.
Wednesday's hearing, the first since Republicans retook the majority and Rep. Spencer Bachus became committee chairman, was billed as an opportunity to look ahead, with a focus on economic recovery and job creation. But it was instead dominated by criticism of the Dodd-Frank Act, policies of the Federal Reserve Board and the role of the government-sponsored enterprises in the crisis.
Rep. Jeb Hensarling, R-Texas, the panel's vice chairman, cited President Obama's pledge in the previous night's State of the Union speech to target overly burdensome regulations. " 'When we find rules that put an unnecessary burden on businesses, we will fix them,' " Hensarling quoted Obama as saying. "Well, Mr. Chairman, we've found one. It's called Dodd-Frank."
But Democrats said the majority was over-politicizing issues facing the committee. For example, Rep. Al Green, D-Texas, said Republicans were exaggerating the impact of Fannie Mae and Freddie Mac in the crisis as a means to get rid of the GSEs, whose existence the GOP has never supported.
"If we are going to properly resolve a problem, we should at least properly identify what the problem is," Green said. "One can conclude that elimination of a finger is appropriate for a hang nail, but I'm not sure that's the best way to resolve the problem. … We really should identify the problem before we decide we are going to eliminate Fannie and Freddie."
Other than in a written statement blaming Dodd-Frank for "regulatory uncertainty" facing small banks, Bachus rarely spoke during the hearing. And his predecessor as chairman, Rep. Barney Frank, D-Mass., now the ranking Democrat, was away attending the World Economic Forum in Switzerland.
That left other members on the committee to air their disagreements.
Rep. Judy Biggert, R-Ill., blasted the Volcker Rule, a provision of Dodd-Frank that aims to limit banks' risky trading. And Rep. Randy Neugebauer, R-Texas, supported a suggestion by a witness that a cost-benefit analysis is needed for rules stemming from the new law.
"Can you point to a provision, any in Dodd-Frank, that made capital more available, that made it more accessible, that lowered the cost of capital for companies and people to access capital? Can you point to where in Dodd-Frank that accomplished something for job creation in this country?" he said. "Congress has created a new risk, and I think we need to start measuring it. It's called regulatory risk."
Members also directed their ire at the central bank, saying the Fed has become too powerful with its new authority to restrict debit-card interchange fees and credit-card terms.
"When we look at a Federal Reserve setting interchange fees, when you look at the Fed setting credit-card terms, this isn't exactly your father's Federal Reserve," Hensarling said.
But Rep. Mel Watt, D-N.C., countered that the criticism directed at the Fed was inconsistent with the hearing's title: "Promoting Economic Recovery and Job Creation: The Road Forward."
"If this hearing were really about jobs and job creation, I wouldn't be so worried," he said. "What I'm really concerned about is the content" getting "us into the independence of the Federal Reserve and the appropriateness of the Federal Reserve's dual mandate. We've had this debate. … This hearing, I don't think, is about creating jobs."
Rep. Maxine Waters, D-Calif., asked witness Donald Kohn, the Fed's former vice chairman, whether the Republican complaints are warranted.
"Mr. Kohn, there seems to be some concentration … on whether the Fed's dual mandate makes it difficult to do its job. Given your background as a former vice chairman of the Federal Reserve, do you think the dual mandate has created such a conflict?" she said.
Kohn, now a senior fellow at the Brookings Institution, responded, "I don't think the dual mandate has presented such a conflict [n]or does it right now. … I do think the Federal Reserve can do both."
