U.S. Rep. Andy Barr’s recent commentary attempts to make the case against the Dodd-Frank Wall Street Reform and Consumer Act of 2010 in favor of legislation removing the safeguards for the financial industry required by that legislation. Barr proclaims that none of the promises of Dodd-Frank have been kept.
Even if you accept the false assumption offered by Barr that all economic circumstances are the direct result and product of banking legislation, he ignores the fact that since the middle of 2009, the U.S. economy has undergone the longest expansion since World War II and the 10 million jobs lost resulting from the 2008-09 downturn have been added back.
In addition, I respectfully point out other false inferences in his column:
First, Barr ignores the fact that the financial industry (banks, brokerages and insurers) differs from the rest of the economy in that they hold and use our money. One who holds the money of others owes a fiduciary duty to their customers and must consider their benefit first before they think of themselves.
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In 1933, Congress saw fit to add safeguards to the financial industry precisely because that industry had failed to regulate itself. Those safeguards worked well for 65 years until they were repealed in 1999. It took five years for the financial industry to mess things up again, and by 2008, 10 million jobs were lost and asset value was devastated.
The legislation being proposed by Barr seeks to remove the current safeguards put back in place in 2010 and allow the financial industry to self-regulate once again. Anyone who believes that the financial industry will regulate itself ignores human nature and all economic history and reality.
Second, Barr states that 1,500 banks have “disappeared” since 2010, inferring that this is due to excessive regulation imposed by the 2010 legislation. In fact, the requirements of the 2010 legislation were not fully phased in until 2014. From the first of 2011 through the end of 2015, there have been a total of 193 bank failures in the United States, with 167 — or 87 percent — of those being the lingering result of the 2008-09 downturn created by the repeal of the safeguards in 1999.
Barr ignores the economic reality of banks “disappearing” through mergers and acquisitions of smaller banks by larger ones, which often occurs during good economic times.
Third, Barr suggests that his new legislation will provide an “off-ramp” for certain financial institutions that have adequate capital. It is instructive that this phrase is often used in the financial press by representatives of Wall Street firms, and it is obvious why those folks want to return to such circumstances.
However, the ultimate off-ramp was provided to the financial sector in 1999 by the repeal of the Glass-Steagall legislation and that off-ramp resulted, predictably, in the financial industry hitting the traffic going 110 mph and the equally predictable 10-million-job-loss pileup.
Finally, Barr ignores the reality that the Dodd-Frank legislation from 2010 expressly prohibits the use of taxpayer funds to bail out the financial industry as was done in 2008 and 2009. It was precisely this use of taxpayer funds that was the cause of universal anger at that time as Wall Street handed the taxpayers the bill for the damages wreaked by the heads-we-win, tails-you-lose position allowed them after 1999.
In our system of government we are blessed with the ability to make choices. If ideological notions are more important than millions of jobs and the protection of retirement savings and asset values, that is a choice you can make. Just remember, with choices come consequences.
Calvin D. Cranfill of Lexington is a certified public accountant.
At issue: Aug. 1 commentary by Rep. Andy Barr, “Revise banking laws for opportunity for all, bailouts for none: