WASHINGTON, DC — Congressman Jeb Hensarling, the top Republican on the House Financial Services Subcommittee on Financial Institutions and Consumer Credit and formerly the lone Member of Congress on the Congressional Oversight Panel (COP) for the Troubled Asset Relief Program (TARP) issued the following statement about Senator Dodd’s financial reform proposal.

“I haven’t read Senator Dodd’s entire 1336 page bill, but I have read enough to know it is not in America’s best interest because of what’s in it and what’s not in it.”

“The Dodd bill gives the Federal Reserve breathtaking new authority.  Not only does it establish a new bureaucracy within the Fed with the power to ban products, it also makes the Fed the systemic risk regulator – giving it the authority to break up U.S. companies.  The Fed should be focused on monetary policy.  We ought to be considering what extraneous responsibilities to take away from the Fed – not awarding it with more regulatory authority.” 

“The Dodd bill creates a new bureau within the Fed that has the authority to restrict consumer credit by essentially banning products that it deems abusive.  This new government bureaucracy will create an additional, burdensome layer of regulation that will only serve to restrict choices and increase costs for consumers in the midst of an economic downturn.” 

“The Dodd bill has a bailout fund that will soften the blow for companies that take on too much risk. While proponents claim that this fund will never cost the taxpayer a dime, these are the same people that said Fannie and Freddie would never need a taxpayer bailout.  Until we see regulatory policies that preserve market discipline and allow market participants to fail without taxpayer dollars put on the line, we will have a permanent government occupation of our economy.  The American people are tired of bailouts and want to see a return to market discipline – a return to fairness.  Unfortunately, Senator Dodd’s bill misses the mark.”

“The most astounding absence in the Dodd bill is ending the bailout of Fannie Mae and Freddie Mac.  No entities played a larger role in causing the crisis than Fannie and Freddie, and yet they were essentially ignored in the Administration’s White Paper, Chairman Frank’s regulatory reform bill and now Chairman Dodd’s draft bill.  The Dodd draft marks the third opportunity Democrats have had to protect taxpayers from tens if not hundreds of billions of dollars of more direct losses at Fannie and Freddie on top of the $5.4 trillion in risk taxpayers now face, and the third time they have chosen to ignore them.  While Democrats are moving the ball backward, Republicans are fighting to protect taxpayers by reforming these entities.”

“House Republicans proposed a comprehensive plan to refocus the Fed on its dual mandate, end bailouts by forcing companies to face the consequences of their mistakes, and reform Fannie and Freddie.  That plan eliminates “too big to fail” by creating a new chapter of the bankruptcy code for large non-bank financial firms, placing impartial bankruptcy judges, not politicians, in charge of resolving failed companies.”