U.S. Senator Mike Crapo (R-ID), Ranking Member of the Senate Banking, Housing and Urban Affairs Committee, today delivered the following remarks during a Banking Committee hearing on Wall Street Reform and Oversight:
Thank you, Mr. Chairman. You and I have had a personal friendship and good working relationship over the years, and I look forward to building on that as Chairman and Ranking Member of the Committee.
One of my objectives and hopes would be to work together on commonsense, bipartisan solutions to issues before the committee.
We have already sent a joint letter to inform the regulators of our concerns about the impact of the proposed Basel III requirements on community banks, insurance companies and the mortgage market, so we are off to a good start.
I welcome the new Members of this committee: Senators Coburn and Heller, as well as Senators Manchin, Warren and Heitkamp.
Today, the Committee will hear about the on-going implementation of Dodd-Frank.
Academic researchers estimate that when Dodd-Frank is fully implemented, there will be more than 13,000 new regulatory restrictions in the Code of Federal Regulations.
Over 10,000 pages of regulations have already been proposed, requiring more than 24 million compliance hours each year -- and that is only the tip of the iceberg.
Of some 400 rules required by Dodd-Frank, roughly one-third have been finalized, one-third have been proposed but not finalized, and one-third have not been even proposed.
Together, the hundreds of Dodd-Frank proposed rules are far too complex, offering confusing and often contradictory standards and regulatory proposals.
I am concerned that the regulators do not understand the cumulative effect of the hundreds of proposed rules, and that there is a lack of coordination among them, both domestically and internationally.
That is why it is important for the regulators to perform meaningful cost-benefit analysis so that we can understand how these rules will affect the economy as a whole, interact with one other and impact our global competitiveness.
An enormous number of new rules are slated to be finalized this year as a result of Dodd-Frank, Basel III and other regulatory initiatives.
At this important juncture, we need answers to critical questions.
First, what are the anticipated cumulative effect of these new rules to credit, liquidity, borrowing costs and the overall economy? Ultimately, we need rules that are strong enough to make our financial system safer, but that can adapt to changing market conditions to promote credit availability and spur job growth for millions of Americans
Second, what have the agencies done to assess how these complicated rules will interact with each other and the existing regulatory framework? I'm hearing a lot of concern about how the interaction of some rules will reduce mortgage credit through the Qualified Mortgage (QM) rule, proposed Qualified Residential Mortgage (QRM) rule, and the proposed international Basel III risk-weights for mortgages.
And third, what steps are being taken to fix the lack of coordination and harmonization of rules among the U.S. and international regulators on cross-border issues? For example, the U.S. Commodity Futures Trading Commission (CFTC) has issued a number of so-called guidance letters and related orders on cross-border issues. The CFTC's initial proposal received widespread criticism from foreign regulators that the guidance is confusing, expansive and harmful. Meanwhile, the U.S. Securities and Exchange Commission (SEC) has not yet issued its cross-border proposal.
There is bipartisan concern that some of the Dodd-Frank rules go too far and need to be fixed.
A good starting point is to fulfill Congressional intent by providing an explicit exemption from margin requirements for non-financial end-users that qualify for the clearing exemption.
Similar language passed the House last Congress by a vote of 370 to 24.
Federal Reserve Chairman Bernanke has confirmed that regardless of Congressional intent, the banking regulators view the plain language of the statute as requiring them to impose some kind of margin requirement on non-financial end-users unless Congress changes the statute.
Unless Congress acts, the new regulations will make it more expensive for farmers, manufactures, energy producers and many small business owners across the country to manage their unique business risks associated with their daily operations.
An end-user fix is only one example of bipartisan actions that we can take to improve the safety of our financial system without unnecessarily inhibiting economic growth.
It is my hope that today's hearing will provide a starting point for us to address these critical and much needed reforms.
Thank you, Mr. Chairman.