Bachus: Record Number of Banking Regulations Stunt Private Sector

A speaker at the 2011 Mortgage Bankers Association Conference’s first general session walked onto the stage hefting a worn-out cardboard box with “Dodd-Frank Act” written in red letters on one side. He grabbed fistful after fistful of papers representing the thousands of regulations the bill has produced, and dropped them onto the stage, ultimately dumping out the entire contents of the box as the audience applauded.

The man was not a frustrated mortgage banker, but rather Representative Spencer Bachus (R-Ala.), Chairman of the House Financial Services Committee.

Although the piles of regulations that have accrued from the Dodd-Frank Act may stem from good intentions, they’ll most likely yield unintended consequences and serve to cramp the private market, said Bachus at the MBA conference, held this year in Chicago, Ill.


More than 3,700 new regulations have come from the bill, with another 4,257 in the pipeline, said Bachus, and 219 of those will have a net negative impact of $100 million or more on the economy, according to cost analysis.

But, in order to strengthen the American economy, Bachus said, we need to be very careful about passing regulations.

There’s too much spending, and not enough revenue, he said; “That’s $100 million for the economy if those regulations aren’t passed.”

And, while he acknowledged that they’re “well-meaning” in intention, he also pointed out that numbers of regulations being passed in Washington, D.C. are at a “record high.”

“There’s never been this many [regulations] limiting and restricting the private sector,” Bachus said in his presentation. “The only other time where the government was managing or micromanaging the economy this much was during the Great Depression.”

He mentioned former president Franklin D. Roosevelt’s New Deal, saying that the worst part of regulations are the unintended consequences.

The Agricultural Adjustment Agency was created as part of the New Deal, in an attempt to “help” farmers who were struggling with the low prices of agricultural commodities.

The agency passed regulation tinkering with supply-and-demand metrics that brought about plowing under 10 million acres of cotton, and killing six million piglets, in 1933.

By 1935, the US was importing 36 million bales cotton, and 2 million pounds ham and bacon, because of a shortage. In two years’ time, the US had gone from exporting to importing, and from being the largest cotton exporter to the largest importer.

“I don’t think I’ve ever seen a Federal program which didn’t have an unintended consequence,” Bachus told the audience. Then, in reference to the Dodd-Frank Act, he added, “We have to make sure that all these regulations don’t have all these unintended consequences.”

Government planning and control did not get the American economy to be the largest, he said, adding that the government needs to step out of the way and allow the private market to take over.

Earlier in the MBA conference’s first general session, newly-elected chairman Michael Young voiced similar concerns, saying that Fannie Mae and Freddie Mac had “too big of a government footprint,” taking up a majority of the mortgage market.

“That must be reduced,” said Young.

He also said the MBA believes the Dodd-Frank qualified residential mortgage (QRM) guidelines are too rigid, and don’t allow for mortgage lenders’ discretion to grant exemption for lower risk loans. The MBA has previously spoken out against the new ruling.

However, Raj Date, the special advisor to the Consumer Financial Protection Bureau, countered by saying that the Bureau believes in “smart regulation.”

This means regulation that is evidence-based, relying on research and data analysis; participatory, sharing exactly what they’re doing with the public and with industries; and precise, inviting feedback for areas which need immediate focus.

Written by Alyssa Gerace

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  • Since when are regulations passed?  Agencies and US Departments issue them.  Laws regulate but regulations explain laws from the view of those who are charged with overseeing and/or implementing them.  Sometimes one has to wonder who new laws are intended to be well meaning FOR?

  • I have been talking and lobbying against the “Financial Regulatory Reform Bill” (Dodd-Frank) since its passage. Many of you have seen my comments about it.

    I say this once again, the intent of the bill along with the “Consumer Financial Protection Bureau” (CFPB) is to drive the small banks, small credit unions and yes, the small businesses  under!

    I say the small businesses because so many businesses rely on small banks for thier loans and to keep them afloat. This bill has given the Federal government more control and power over our financial system than any bill I have ever seen in my life time!

    There is only one solution and that is a complete repeal of the bill in its entirety before it is to late!

    John A. Smaldone

  • I wish I had had the time to attend the MBA conference.It sounds like it was pretty lively with Rep Bachus’ show and the previous days comments about all of the regulations pertaining to mortgage products that no longer exist in the marketplace. John, hopefully, our legislators will come to agree with you(as I do)and Rep Bachus. Good intentions….poor execution Mr Frank.

    • Burgess,
      The problem is not who is right or wrong but what WE are leaving behind for the next generation to deal with.  If they do not even understand the process, how can they respond?
      The three of us are more skeptical and cynical because we have lived more history and history does NOT prove the best of intentions produce even good results.  What are not significant are the speeches of politicians.  All they do is tickle the ears of the immediate audience.
      We all remember Representative Frank yelling in Congress that homeownership should be denied no American and after the collapse of the mortgage market declaring that the issue was NEVER homeownership but rather a decent place to live.  He denied even making the first statement until CNBC broadcast portions of the earlier speech.
      Until legislation is introduced repealing Dodd-Frank, talk and stirring speeches are the stuff of politicians.  While that law will be tweaked, no legislator wants to see the legacy of another politician totally repealed — after all who would protect their own legislative legacy.  We all know what happened to Marat, Danton, and even Robespierre.  Those who tear at the roots are generally torn down in the aftermath. 

      As to politicians the 10%/90% rule still applies.  10% get 90% of anything worthwhile done.  The other 90% just add to the mess. 

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