Helping South Dakota Families Access Capital
When the recession hit in 2008, it was initiated by the collapse of the housing market. Ironically, many argue the housing collapse was, at least in part, caused by the federal government pushing financial institutions to lend money to those who couldn’t afford it. The stagnant economy that followed and the resulting loss of wealth and capital led to sharp cutbacks in consumer spending. In places like South Dakota, consumer spending drives our economy – and we definitely felt the recession. The loss of consumer spending, coupled with the lack of business investment, led to massive job losses. Americans felt the pressure of the most dramatic employment contraction since the Great Depression. However, like most actions with the federal government, they acted too late and over-corrected.
Since the passage of the Dodd-Frank Act in 2010, financial institutions in America have been overly burdened and consumers have paid the price. Dodd-Frank was 2,300 pages of burdensome regulations that created multiple layers of untouchable, unaccountable bureaucracies. It passed with only three Republican votes between both the U.S. House and Senate. It was the worst example of partisan “reform” since Obamacare.
As a member of the Senate Banking, Housing, and Urban Affairs Committee, one of my top priorities has been to provide regulatory relief to financial institutions so that South Dakota families can have better access to loans and capital – capital that is used to buy a home, start a business, purchase a car and invest in the future of our state.
One flaw in our banking rules today is that, too often, the administration takes a “one-size-fits-all” approach to regulating. In South Dakota, we are home to both large and small financial institutions that serve a host of purposes for our state. All agree that when it comes to banking regulation, one size does not always fit all. This type of approach is particularly harmful to our smaller financial institutions which are so vital to our communities.
I recently introduced legislation that would require federal regulatory agencies to take risk profiles and business models of institutions into account when crafting regulations. The Taking Account of Institutions with Low Operation Risk (TAILOR) Act would allow smaller financial institutions to focus their resources on taking care of their customers, rather than spending time and money on regulatory compliance. This will allow them to better meet the needs of families and local businesses, which will in turn lead to a stronger economy and healthier communities across our state.
The TAILOR Act also requires regulators to conduct a review of all the regulations issued by the relevant agencies since the 2010 passage of the Dodd-Frank Act. Approximately 500 new final rules have been issued since Dodd-Frank was enacted, many of which have placed undue burdens on our banks and our economy. If the review finds that the regulations issued since 2010 do not conform to the TAILOR Act, the agency would be required to revise the regulations.
I also recently introduced legislation that would exempt community banks and credit unions from the Consumer Financial Protection Bureau’s revised Regulation C final rule, which amends the 1975 Home Mortgage Disclosure Act (HMDA). The intent of HMDA is to determine whether certain financial institutions are properly serving the communities in which they are located. However, the revised rule is harmful to our smaller banks and credit unions. It would require them to collect nearly 50 unique data points on loan applications and share that information with the federal government – with a huge cost to comply.
Too often today, financial institutions are forced to divert their resources from providing loans and services within their communities in order to comply with onerous regulations. The TAILOR Act and Home Mortgage Disclosure Adjustment Act would alleviate compliance hurdles facing many of our community banks and credit unions today. Rather, these bills would allow our financial industry to do what they do best — serve their customers and strengthen our communities. Sound regulation is necessary for a strong economy, but Dodd-Frank goes too far.
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