A financial reform bill is heading for a vote in the U.S. House after clearing the Financial Services Committee.
The CHOICE Act is an overhaul of the Dodd-Frank legislation signed into law by President Barack Obama in 2010. Illinois Congressman Randy Hultgren, R-Plano, supports the measure. He pointed out a key provision would prohibit taxpayer bailouts of banks of any size.
“A lot of promises were made when Dodd-Frank passed that it would do away with ‘too big to fail,’” Hultgren said. “It really hasn’t done what it said it was going to do. So that’s really a big part of this … making sure that it’s very clear that we’re not going to be bailing out these entities. They’re going to have to deal with it themselves.”
In 2008, Congress approved the Troubled Asset Relief Program (TARP), which helped bail out banks in the wake of the subprime mortgage crisis. Hultgren doesn’t want a repeat of that scenario.
“They can’t get the private benefit and then, if they make bad decisions or huge risks, put that back on the taxpayers,” Hultgren said.
The CHOICE Act also repeals the so-called Durbin Amendment in Dodd-Frank, which caps fees that banks can charge on debit card transactions.
“This is price fixing,” Hultgren said. “It’s government coming in and saying what has to happen in the marketplace.”
Some said the Durbin Amendment would be a win for consumers, as merchants passed along savings from the lowered swipe fees. However, a 2013 report by the University of Chicago Coase-Sandor Institute for Law & Economics found that consumers lost more on the banking side than they gained on the merchant side.
“[We’ve seen] a loss of services that banks were able to provide before, like free checking and no-cost accounts,” Hultgren said. “Many of these things have gone away.”
Hultgren said the Choice Act would provide relief for smaller banks and credit unions in Illinois by rolling back many of Dodd-Frank’s 23,000 pages of regulations. The 14th District Republican argued many institutions are being micromanaged by the federal government, leading to banking closures across the state and nation.
“If it’s something local that was never part of the problem, we need to recognize that they need some different ways that they can function,” Hultgren said.
A vote on the CHOICE Act in the U.S. House is expected by early June.