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Financial Regulation and Economic Growth Are Not Mutually Exclusive

Financial Regulation and Economic Growth Are Not Mutually Exclusive

Detailing the facts that prove “financial regulation and economic growth are not mutually exclusive,” Better Markets last week submitted a letter in response to a request from the Senate Banking Committee for proposals to promote economic growth and market participation.

Better Markets was one of the lone voices speaking out on behalf of consumers, investors, taxpayers and America’s hardworking families with a strong defense of the financial protections in the Dodd-Frank Act.  After showing that the rules implementing Dodd Frank have not hurt lending, economic growth, jobs or bank profits, we argued for finishing the rules and making some key changes.

Predictably, Wall Street’s biggest banks, its lawyers and lobbyists, and its trade associations also weighed in, arguing for dismantling and rolling back the rules, which would increase their profits and bonuses while putting American families at risk of another devastating financial crash.  For example, the Financial Stability Oversight Council (FSOC) was the focus of several comments seeking to limit how it protects the American financial system from  systemic risk, particularly from gigantic nonbanks.  FSOC is the country’s only early warning system for detecting systemic threats to our financial system, keeping a watchful eye on all financial markets.  Altering the responsibilities, power and authority of FSOC and how it does its job would make another financial crisis more likely. 

Better Markets also addressed the importance of regulated and transparent markets, including calls for enacting credit rating agency reform, fixing the broken industry-biased arbitration system, and ensuring full funding for the cops on the Wall Street beat, the SEC and the CFTC.  We also addressed the need to finally fulfill the promise of a truly competitive derivatives market and a robust consolidated audit trail. 

The letter ended with a cautionary note, urging the Banking Committee to see industry proposals for what they really are:

“The Committee’s request for legislative ideas to encourage economic growth will no doubt result in a flood of proposals from the many in the financial industry arguing that they must be deregulated to free up the market and unleash its economic potential.

“It is important that the Committee recognize these arguments for what they are: self-interested and self-serving calls for mindless deregulation to unleash unlimited profits for banks and the shifting of risk to the taxpayer. History shows reasonable, thoughtful regulation of the financial sector, as has been implemented since 2010, is not only compatible with economic growth, it is a necessary condition for prolonged growth and wealth-building.”

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