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September22,2016
SUPPORTH.R.5983,THEFINANCIALCHOICEACT
DearRepresentative,
Onbehalfoftheundersignedorganizations,wewritetoexpressoursupportforH.R.5983,theFinancialCHOICEAct,introducedbyChairmanJebHensarling,R-TexasandrecentlypassedoutoftheFinancialServicesCommittee.TheCHOICEActcreativelyanddirectlytacklesmanyofthemostpressingissuesintoday’sfinancialmarkets.Itwouldprovideessentialregulatoryreformandimprovedgovernanceofagencies.TheCHOICEActcontainsmanyimportantreformsthatourgroupshavelongsupported.Inparticular,theactreinsintheConsumerFinancialProtectionBureaubygivingitabipartisanboard,requiringstructuralchangeandcreatinganindependentinspectorgeneralandprivacyprotections.Thebillalsoreformsregulationbyrequiringcost-benefitanalysis,makingfinancialregulationssubjecttoREINSActprovisionsanddemandingincreasedtransparencyofFederalReserveregulatoryactivity.Itpromotescapitalformationforsmallbusinessesandjobcreatorsanditbolsterscommunityfinancialinstitutionsthroughadditionalregulatoryrelief.However,themostimportantfeatureoftheCHOICEActisfoundinSectionIofthelegislation.Theactoffersavoluntary“off-ramp”fromthemostburdensomeregulationsimposedbytheDoddFrankAct,butonlyforinstitutionspreparedtomakeasignificantcommitmenttocapitalization.Byrequiringinstitutionstoholda10percenttangible-leveragecapitalratioandtomaintainahighCAMELratingbeforeDodd-Frank’sburdenscanbelifted,thebillprotectstaxpayersandensuresstabilityinthefinancialsector,withoutthecrushingcostsofover-regulation.Somemaydebatewhetherthe10percentthresholdissufficient,butareviewoffinancialliteratureshowsittobeareasonableandconservativeestimateofthecapitalnecessarytoprotecttaxpayersfromriskduringacrisis.
ThekeytotheCHOICEActcanbefoundinthenameitself.Byprovidingfinancialinstitutionswithachoice,theactsetsupaperfecttestcaseforthemarket.Someinstitutionswillchoosetohavelesscapital,butremainunderburdensomeregulations,relyingontheiroversighttoavoidfuturecollapse.Otherswillchoosetoprotectagainstriskbyputtingtheirowncapitalontheline,insufficientamountstoprotecttaxpayers.Overtime,shouldthefatesoftheseinstitutionsdiverge,itwouldprovidevaluableeconomiclessons.
Itisworthnotingthatinstitutionsthatopttoincreasecapitalwillstillbeunderregulatoryscrutiny.Theactdoesnotremovealloversight,butitdoesproviderelieffromthemostonerousburdensimposedasaresultofpoliticaloverreactiontothefinancialcrisis.Insum,theFinancialCHOICEActservesasalong-overduefundamentalcoursecorrectionforthefinancialregulatoryregime.Itimprovesaccesstocredit,providesrelieftocommunityfinancialinstitutionsandhelpspromotegreaterfinancialstabilitywithoutunnecessaryregulation.Weurgeyoutosupportthisimportantmeasure.
Sincerely,
LoriSanders RStreetInstitute PhilKerpen AmericanCommitment NormSingletonCampaignforLiberty
AndrewLangerInstituteforLiberty
KyleHauptmanMainStreetGrowthProject
ClarkPackardNationalTaxpayersUnion
DavidWilliamsTaxpayersProtectionAlliance
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