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Zeldin: The right CHOICE for the Long Island economy

June 21, 2017
In The News

The financial meltdown of 2008 left our economy in shambles. Millions of Americans were negatively impacted, many right within our home state, with so many people losing their jobs, having their homes foreclosed upon, and ultimately left in a state of dire financial uncertainty. The “Great Recession” was caused by weak underwriting standards, flawed big government policies and the trading and long-term holding of poorly rated home loans which would never be paid back. In 2008 alone, 861,664 families lost their homes.

The crisis only worsened in the following years and left our nation with an economic gap which we are still recovering from. The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly referred to as “Dodd-Frank,” was signed into law in 2010. It was clear that a better direction was needed for our economy to recover; however, Dodd-Frank has had so many disastrous and negative consequences that contradict the originally stated purpose of the legislation.

As a result of Dodd-Frank, new onerous rules like the qualified mortgage rule have contributed to young families raising their children in their parent’s basement because they can’t afford the down payment on a home or get a mortgage from a local bank. Our community banks and credit unions, which have been serving local businesses and families for generations, cannot afford the compliance costs imposed on them by Dodd-Frank. They have to lay-off employees or, worse, sell to larger firm because the “compliance tax” has squeezed them so severely. Meanwhile the big banks are able to front the costs of these regulations and all the necessary attorneys and lobbyists with ease. The problem is becoming so bad that some reports even show that the U.S. economy is losing one community bank or credit union per day and the loss of market share for community banks has doubled. Big banks are getting bigger, and small banks are becoming fewer.

Dodd-Frank also created the Consumer Financial Protection Bureau (CFPB), a highly unconstitutional and unaccountable fourth branch of government exercising immense power over the financial sector that has harmed too many of the middle income Americans it was supposedly created to help. As a result of this agency’s undue influence, auto loans have become far more expensive and bank fees have increased for so many Americans. To make matters worse, small businesses have found that their sources of credit have been dramatically reduced, cutting their access to capital and limiting their potential for growth and job creation.

The House just passed the Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs Act, otherwise known as the Financial CHOICE Act of 2017 (H.R. 10). This critical legislation addresses an extensive amount of the harmful aspects of Dodd-Frank by imposing stricter accountability, increasing access to credit and capital for small businesses and individuals, and so much more.

Bad financial industry actors know that taxpayers will eventually bail them out, because Dodd-Frank perpetuates “Too Big To Fail.” The average American should never have to shoulder the burden when these financial institutions go belly up, and CHOICE will ensure these institutions remain accountable for their actions. There is something to be said about the fact that the CHOICE Act is garnering enormous support from community banks and credit unions, while drawing high profile detractors from Wall Street. Goldman Sachs CEO Lloyd Blankfein has publically stated that he will profit under Dodd-Frank, and now, many of the big banks and financial institutions have come out in strong opposition to CHOICE. JP Morgan Chase CEO Jamie Dimon has even referred to the badly designed regulations following the 2008 crisis as a “bigger moat” which protects his bank from the competition. Dodd-Frank allows these big banks to claim a larger market over the financial industry at the expense of the American consumer and our community institutions, whereas CHOICE will put the power back into the hands of the little guy.

Economic liberty, transparency and choice are the cornerstones of a thriving economy. Many of the alleged “protections” implemented under Dodd-Frank have done nothing but increase costs for both businesses and consumers, while limiting choice by imposing a layer of costly regulations negatively impacting available financial products. Now that the CHOICE Act has passed through the House, it is imperative that it passes the Senate so that we get it on the President’s desk to be signed into law. We must learn and never forget the lessons of the 2008 housing crash as well as the reality of Dodd-Frank’s negative impacts on small business and consumers. The sooner CHOICE becomes law, the sooner we can unleash the full potential of the American economy.

Congressman Zeldin, a member of the House Financial Services Committee, represents the First Congressional District of New York.