As Congress prepares to vote on debating Sen. Chris Dodd’s “Restoring American Financial Stability Act,” a broad spectrum of conservative and free-market groups expressed “grave concerns” about the financial regulation bill and its negative impact on Main Street. The letter has been signed by the Competitive Enterprise Institute; the fiscally-conservative Americans for Tax Reform and Americans for Prosperity; and Phyllis Schlafly’s populist Eagle Forum. Also signing on are two energetic new grassroots groups that speak on behalf of much of the tea party movement: Tea Party Express and American Grassroots Coalition.
The letter, included below, highlights what it calls “a by-no-means exclusive list” of major concerns with the bill. These include the bill’s broad definition of “nonbank financial company” that would mean that many “Main Street non-financial businesses would be hit with taxation, regulation, and possible nationalization by the Federal Reserve,” the proxy access mandates that would usurp state incorporation law and “empower union pension funds and other progressives by forcing companies to fund their Saul Alinsky-style campaigns for a company’s board of directors,” and the lack of any reforms in the bill of Fannie Mae and Freddie Mac – the two government-created mortgage giants that were “primary causes of the crisis.”
The letter concludes: “While we believe the government should act swiftly to punish financial fraud, it should not diminish Americans’ choices and opportunities in the name of ‘stability.’ We believe that fundamentally, as with health care, although there are a lot of complexities involved, this is about the future of our country. Do we continue living in an America where entrepreneurs and investors can launch new businesses and new ideas — or do we live under a system in which almost every transaction has to be approved by a government agency or czar?!"
Text of the coalition letter:
April 23, 2010
Dear Senators Reid and McConnell,
As leaders of groups representing millions of Americans that comprise a Center-Right Coalition, we have grave concerns about the “Restoring American Financial Stability Act” and its negative impact on Main Street. While we believe the government should act swiftly to punish financial fraud, it should not diminish Americans’ choices and opportunities in the name of “stability.”
We believe that fundamentally, as with healthcare, although there are a lot of complexities involved, this is about the future of our country. Do we continue living in an America where entrepreneurs and investors can launch new businesses and new ideas — or do we live under a system in which almost every transaction has to be approved by a government agency or czar?!
Below is a by-no-means exclusive list of our concerns about provisions that hurt Main Street.
1. Main Street non-financial businesses would be hit with taxation, regulation, and possible nationalization by the Federal Reserve: Defenders the $50 billion upfront resolution (bailout) fund argue that the money would come not from general taxpayer funds but fees on “financial institutions.” But putting aside the fact that even taxes on big banks would be passed on to depositors and borrowers, the bill’s definition of “financial institution” subject to the fee and regulation by the Federal Reserve goes far beyond a bank or stockbroker.
Life, home and auto insurers would be subject to this bailout fund fee even though they already pay into state funds for insolvent insurance companies, and the fee would then be passed on to their policy holders. The Federal Reserve would also have the power to define a “nonbank financial company” to encompass any business it deems as “substantially engaged” in financial activity, and experts fear this definition could include energy companies and manufacturers tangentially involved in finance and credit. These firms would be subject not just to the bailout fees, but to the Fed’s new powers of breakup and nationalization for firms it deems “systemic."
2. “Proxy access” and corporate governance provisions would take power from states and empower progressive interest groups — from unions to animal rights: Even though they have little justification in preventing the next financial crisis, the bill contains “proxy access” provisions that would empower union pension funds and other progressives by forcing companies to fund their Saul Alinsky-style campaigns for a company’s board of directors. Combined with other items federalizing incorporation law — like a mandated majority instead of plurality standard for director votes– this could enable special interest activists to harm the interests of ordinary shareholders and encourage corporate directors to cut deals with them on things like card check, cap-and-trade, and kicking conservative media personalities off the air.
3. What’s not in the bill — any reform of Fannie and Freddie: The bill ignores the two of the primary causes of the crisis: Fannie Mae and Freddie Mac. They’re bigger than ever, and the Obama administration quietly lifted the $400 billion cap on government backing on Christmas Eve — the “Christmas bailout” — so now taxpayers have unlimited liability for them. A bill aiming to prevent the next crisis is woefully insufficient without reform of Fannie and Freddie, and could have the unintended effect of allowing them to carry the risks that other businesses would be barred from taking.
We are happy to meet with you or members of your staff to discuss further these vital concerns.
Jennifer Hulsey, Co-Founder, American Grassroots Coalition
Dick Patten, President, American Family Business Institute
Tim Phillips, President, Americans for Prosperity
Grover Norquist, President, Americans for Tax Reform
Chuck Muth, President, Citizen Outreach
Gary Aldrich, Chairman, CNP Action
John Berlau, Director, Center for Investors and Entrepreneurs, Competitive Enterprise Institute
Phyllis Schlafly, President and Founder, Eagle Forum
Myron Ebell, Director, Freedom Action
Colin Hanna, President, Let Freedom Ring
Amy Ridenour, President, National Center for Public Policy Research
Lewis Uhler, President, National Tax Limitation Committee
Pete Sepp, Executive Vice President, National Taxpayers Union
William Greene, President, RightMarch.com
Jim Martin, Chairman, 60 Plus Association
Lisa Miller, Organizer, Tea Party WDC
Amy Kremer, Director, Grassroots and Coalitions, Tea Party Express
The Honorable Christopher Dodd The Honorable Richard Shelby
Chairman Ranking Member
Committee on Banking, Housing, Committee on Banking, Housing,
and Urban Affairs and Urban Affairs
United States Senate United States Senate