The Financial Services Subcommittee on Oversight and Investigations, chaired by U.S. Rep. Sean Duffy (R-WI), on Wednesday reviewed allegations regarding the causes of the 2008 American financial crisis, which resulted in passage of the Dodd-Frank Act.
During the hearing, numerous witnesses offered testimony that indicated that the Dodd-Frank Act not only failed to offer an effective response to the financial crisis of 2008, but brought about many new concerns and created a climate that could lead to another financial crisis.
“Those who supported Dodd-Frank have been more concerned with helping special interests in Washington than their constituents back home, and the proof is in the numbers,” Duffy explained. “Fewer people have returned to the workforce than in any other modern recovery. Our community banks are closing every week; main street lenders are being slowly euthanized; and the No. 1 cause that I hear from people in Wisconsin is the excessive regulatory burden imposed by this administration. Dodd-Frank is a major cause of that burden.”
Witnesses outlined a number of concerning issues with the Dodd-Frank legislation, discussing how it was hastily passed in reaction to the 2008 crisis, that it benefits big banks at the expense of consumers and that it does not address the fundamental causes of any financial crisis. Testimony also suggested that rather than being caused by market failures, the 2008 financial crisis was actually the result of bad government policy and regulatory incompetence stemming from bad decisions regarding federal housing policy and the Federal Reserve.
“As the failures and bailouts of the financial crisis accumulated, so too did the calls for a quick and thorough rewriting of the financial regulatory rulebook,” Hester Peirce, director of the Financial Markets Working Group at the Mercatus Center at George Mason University, said. “The resulting act was the product of fear and fury, not of careful analysis. This approach to financial regulation, while a natural response to a market failure narrative, only increases the vulnerability of financial system to regulatory failure.”