RealClearMarkets quoted Daniel Press on banking regulations impact on the banking system.
Ronald Reagan once said, “No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this Earth.”
Reagan said that in 1964. The underlying point still holds true some 53 years later.
But there’s more. Not only do government programs and bureaucracies seemingly achieve eternal life, but they grow bigger with failure. Failure in the private sector means trying something different or going out of business. Failure in government usually leads to bigger budgets, more staff and an expanded reach. Just think about public schools and LBJ’s “War on Poverty” programs.
That’s why it’s so critical to kill costly and misguided ideas for bigger, more intrusive and controlling government before they ever become reality. Consider the current challenges in trying to roll back two massive expansions of government imposed during President Barack Obama’s presidency – ObamaCare and Dodd-Frank.
Central planning via hyper-regulation never works. Regulations limiting new bank entry, and hitting small and regional banks hard wind up restraining small business growth, new business creation and innovation.
As for actions by this Republican White House and Congress, the effort to roll back Dodd-Frank is under way. The U.S. House of Representatives has led the way. The Financial CHOICE Act of 2017 (HR 10), which would repeal significant chunks of Dodd-Frank, passed the House by a vote of 233-186 in early June. Senate action on such a sweeping measure, however, is a question mark, providing another reminder of the difficulties of undoing big policy mistakes that expand big government.
One smaller measure worth taking note of is the Systemic Risk Designation Improvement Act of 2017, which has sponsors from both sides of the political aisle – Democrat Claire McCaskill in the Senate and Republican Blaine Luetkemeyer in the House, both from Missouri. It’s an effort to lift some of Dodd-Frank’s most onerous regulations from the backs of smaller regional banks.
As Daniel Press from the Competitive Enterprise Institute has written, the bill “directs the Federal Reserve to look at interconnectedness, cross-border activities, and complexity when assessing their regulatory requirements, not just size. Currently, the $50 billion limit is an arbitrary designation that subjects medium-sized regional banks, which range somewhere between $50 billion and $250 billion in assets, to the same standards as large, multi-trillion dollar banks. This change makes sense, as regional banks that predominately take deposits and have little exposure to derivatives or trading are clearly not ‘systemically important’ as defined by Dodd-Frank.”
Read the full article at RealClearMarkets.