U.S. Rep. Tom Emmer (R-MN) said that the Financial CHOICE Act, the Republican plan to replace the Dodd-Frank Act and bolster economic growth, would protect the marketplace for community banks and credit unions – a smaller but still significant part of the financial services industry.
“The community banks and the credit unions are the backbone of every small community in my state and in small towns all across this country,” Emmer, who serves on the House Financial Services Committee and represents Minnesota’s 6th district, told the Ripon Advance.
The House Financial Services Committee held a hearing this week that focused on one aspect of the Financial CHOICE Act that would exempt credit unions and banks operating with a leverage ratio of greater than 10 percent from certain capital and liquidity requirements.
The legislation from House Financial Services Committee Chairman Jeb Hensarling (R-TX) would also end taxpayer-funded bailouts of banks deemed “too big to fail.” The concept, that the largest financial institutions are so systemically important to the overall health of the economy that they require government support in the event of a failure, has been debated since the 2007-2008 global financial crisis that resulted in stricter banking regulations.
“The problem is all this heightened regulation and scrutiny wasn’t reserved for just the large banks, but it has acted as a huge burden for small banks and credit unions,” Emmer said.
The Financial CHOICE Act includes measures to provide regulatory relief for community banks and credit unions. These smaller financial institutions support their communities by building relationships with consumers, farmers and entrepreneurs.
There were approximately 8,000 community banks and 8,000 credit unions across the country in 2008, according to Emmer. Those figures remained largely unchanged a year after the financial crisis. Six years after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, however, the number of community banks and credit unions has declined by 25 percent to approximately 6,000 each, he added.
“The community banks and credit unions didn’t cause the crash of 2008,” Emmer said. “They weren’t failing a year after the crash. We started losing them as a direct result of this oversized, overly burdensome and in many ways misguided law called Dodd-Frank. And it is time to go back and start addressing it.”
Credit Union National Association President and CEO Jim Nussle testified before the committee that the regulatory burden cost U.S. credit unions and their members an estimated $7.2 billion in 2014 alone, up from just $4.4 billion in 2010.
The Financial CHOICE Act would also demand accountability from the Consumer Financial Protection Bureau, which would see its sole director replaced with a bipartisan, five member board subject to congressional oversight and appropriations.
“Instead of being an operation that works out of sight, behind closed doors, it would be transparent and its budget would come under the supervision of Congress,” Nussle said.
Taken in its entirety, Emmer said that the Financial CHOICE Act, “would put individuals back in charge of their own self-determination and take away this goliath of a government that has been acting like more of a weight on the growth of our economy as opposed to a facilitator.”
Emmer acknowledged that the Financial CHOICE Act is unlikely to gain acceptance with the current administration, but is a guiding document with new legislative policies for the next Congress to consider.
The House Financial Services Committee recently passed a dozen bills to support economic growth, including Emmer’s Micro Offering Safe Harbor Act, H.R. 4850. Under the bill, small businesses would not be in violation of the Securities Act of 1933 when making non-public securities offerings if each purchaser has a pre-existing relationship with the owner, there are 35 or fewer purchasers, and the amount does not exceed $500,000.
“The idea is if it’s a private offering with your family and friends and personal network, then you shouldn’t have to register as a public company,” Emmer said. “We’re just trying to give people other options under the law to be able to develop the capital necessary to start their next big company.”
Emmer also has called for lowering corporate income tax rates with a goal of jump-starting the economy by increasing jobs and wages. He noted that the United States has the highest corporate income tax rate in the developed world – 39 percent – when combining federal and state rates.
The CREATE Jobs Act, H.R. 4518, authored by Emmer earlier this year, would lower the U.S. corporate income tax rate to five percent below the average corporate income tax rate for Organization for Economic Co-operation and Development countries. As a result, the U.S. corporate income tax rate would drop to 20 percent.
Parts of the CREATE Jobs Act were included in a blueprint released by House Republicans for reforming the tax code. Emmer’s bill currently resides with the House Ways and Means Committee, and Emmer said that he is hopeful that it will move forward this year.
“I think it’s safe to say there is bipartisan agreement in this country that the corporate tax rate is too high,” Emmer said.
Emmer add that it is important that Congress works to streamline both the oversized bureaucracy in government and burdensome regulatory environment, while also lessening the overall tax burden to create jobs and opportunity.
“I believe we owe it to people at home to make sure that we get government out of the way and off their backs so that they can get back to creating the next big thing that drives this country forward,” Emmer said.