A Financial CHOICE Act By Any Other Name


I am fairly certain there are new job positions in Washington D.C. for legislation-namers. Congress once passed laws with names like the Dependents’ Medical Care Act (1956; establishing Medicare) and the Federal, Food, Drug and Cosmetic Act (1938; giving the FDA to oversee the safety of things like ice cream and “articles intended to be rubbed, poured, sprinkled, or sprayed on…the human body”). Fortunately, people on Capitol Hill seem to have noticed that these titles lack a certain je ne sais quoi. Or maybe they don’t look snappy enough in a Tweet. Either way, we now are benefiting from much more exciting “short” titles that promise to save us from the work of actually reading the bill.

This May the House of Representatives approved the Financial CHOICE Act, CHOICE being an acronym for “A Bill to Create Hope and Opportunity for Investors Consumers, and Entrepreneurs by ending bailouts and Too Big to Fail, holding Washington and Wall Street accountable, eliminating red tape to increase access to capital and credit, and repealing the provisions of the Dodd-Frank Act that make America less prosperous, less stable and less free, and for other purposes.” (give me just a moment to catch my breath).

I’m still pondering the “other purposes,” but no one can deny the masterful display of verbiage and acronym-creation on display in this title. What would the law do? Glad you asked. Apparently, it will give us CHOICE (in capital letters), make entrepreneurs dance, and salvage our national prosperity. In fact, it appears that we have all been “less free” without even know it, and the CHOICE Act will rescue us from these shackles, as well. I don’t know about you, but I am feeling more patriotic already.

Some of you might have paused long enough to wonder about that reference to the “Dodd-Frank Act” in line 325 of the title (citation roughly estimated). But probably not. Dodd-Frank sounds uncomfortably like some sort of grilling sausage your grandad insists on eating with Jello salad at cookouts. At any rate, we can tell from the Financial CHOICE Act long title that Dodd-Frank is a great hindrance to the future of our nation and is thereby being repealed.

Just for laughs, let me give you the basics of what the Dodd-Frank Act (otherwise known as the Wall Street Reform and Consumer Protection Act) actually has been doing since it was passed after the 2008 market crash:

1.      Requiring an Oversight Council to monitors banks deemed “too big to fail”, break up those banks if they pose a threat to the economy, and/or require those banks to keep more reserves on hand in case their investments or loans go bad (so taxpayers don’t have to bail them out);

2.      Requiring a Federal Insurance Office to monitor the largest insurance companies and their risk-taking;

3.      Maintaining the Consumer Finance Protection Bureau that works independently to fight for consumers and go after banks for fraud (i.e. the Wells Fargo debacle) as well as abuses in mortgages, debit and credit cards and other loans;

4.      Maintaining the Volker Rule, which allows the feds to monitor the shadowy world of “derivative” trading (that took us by surprise in 2008) and requires any bank that holds your deposits to limit how much risk it takes with your money in investment markets;

5.      Maintaining the SEC office of credit ratings, so that we don’t end up depending again on false credit ratings from private companies;

6.      Strengthening incentives for whistleblowers who report illegal activity at financial institutions.

Could the Dodd-Frank Rule be improved? Probably. At over 2300 pages, there are bound to be some missteps in there. The lobbyists for the Financial CHOICE Act (who look an awful lot like the lobbyists for Bank of America, Capital One, etc…) have made much of the burden Dodd-Frank puts on smaller banks. They are, of course, very generous to be concerned about their tiny counterparts, though this generosity of spirit is slightly undermined by the fact that 1990’s de-regulation allowed them to gobble up most of our small banks.  Ahem. More convincingly, the proponents of the CHOICE Act have been arguing that large banks would make more money and more (risky) loans if pesky laws did not hinder them with restrictions, oversight and annoying paperwork. I have no doubt this is true.

I leave it to you to form your own opinion on the merits of the Financial CHOICE Act. I am only going to suggest that if we do choose to trust the banks to make their own way in the investment world again and it does not work out well, we come up with a better name for the law we pass in response. Maybe the Wealth and Trust in Finances Act. You can choose the short title.