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