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Public Statements

Financial Services and General Government Appropriations Act, 2015

Floor Speech

Location: Washington, DC


Mr. GARRETT. Mr. Chairman, I rise today in an attempt to prevent government regulators from expanding the corrupt doctrine of ``too big to fail'' into even greater parts of our economy. You see, under Dodd-Frank, FSOC, the Financial Stability Oversight Council, has the power to designate companies as SIFIs, systemically important financial institutions.

I have heard people say that SIFI status does not mean too big to fail, but that is a ridiculous claim--on par with the reassurances we used to get that there was no implicit guarantee with Fannie and Freddie, the GSEs.

In the real world, everyone knows that the Federal Government will never allow a SIFI to fail. It is basically the government's stamp of approval, if you will, that says that we really care about this company. And every time FSOC designates a SIFI, it exposes all of us, the American taxpayers, to literally billions and billions of dollars in potential losses.

You see, first FSOC designates the megabanks as being too-big-to-fail SIFIs. Now they are claiming that nonbank firms such as insurance companies and asset managers also should be designated as SIFIs, as well. I really don't think that FSOC will be satisfied until every company in this country is a SIFI. So, obviously, this has got to stop.

That is why I am offering an amendment to prevent the Secretary of the Treasury and the chair of the Securities Exchange Commission, both voting members of FSOC, from designating any additional nonbank companies as SIFIs. You see, SIFI status puts nonbank companies under Federal Reserve regulation. And then the Fed, which only understands banks, imposes its bank-type capital standards on them, and it doesn't really seem to care if that makes no sense at all for these companies. I guess basically if all you have is a hammer, then everything else out there looks like a nail.

And so when companies become SIFIs, they cease to be part of the free market. Instead, they become something else. They become protected entities that are spared the costs and consequences that normal companies face. And, so, over time, the combination of this protected status and the Fed's risk-averse regulation will sap the energy and also the competitiveness from these companies.

Do you know what? Creative thinking and management will be seen as too radical, and innovative business structures will be stamped out as too risky. Meeting some G-13's definition of ``safety'' will take the place of building shareholder value. Instead, lobbying and political donations will become the biggest, highest, and best use of capital for these companies. And government will corrupt the private sector and, in turn, it will corrupt government.

You only have to look at the corporate culture over at Fannie Mae to see what sheltering a company from market discipline does to it. What do I mean by that? If you like the GSEs, then you are going to love SIFIs. And so we should not allow too big to fail to take root in the nonbank financial sector. These companies are too important as a counterbalance to the megabanks for us to ruin them with crony capitalism.

You see, Dodd-Frank was based on a faulty premise, and this is it: that the financial crisis was caused exclusively by the greed of large financial institutions and that intrusive government regulation could have prevented all this and prevented the crisis by keeping them from making all these risky investments.

So with these ideological blinders on, it is no surprise that we ended up today with FSOC and SIFIs. Instead of solving the problem of too big to fail, Dodd-Frank basically codified it.

FSOC is not working out as intended. And with every reckless designation of a nonbank company as a SIFI, FSOC steps in and makes our economy more dangerous and makes it more unstable. As they say, if you find yourself in a hole, you should do what? Stop digging.

So I respectfully request that you support my amendment, and I reserve the balance of my time.


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