If a business is mismanaged, if its leaders make poor decisions, the business should be allowed to fail. The bailouts of financial and auto companies have turned that philosophy on its head and, I think, are a dangerous road to go down. We need to set a new course. It is what the American people want.
The financial regulatory reform bill in the Senate allows the Federal Deposit Insurance Corp. and the Federal Reserve to continue to come to the aid of failing financial firms, which means that the financial markets will be fully aware of the government's authority and inclination to prop up large failed financial institutions.
The very existence of this authority undercuts the claim that the government will ever actually wind up such firms. These firms, along with their creditors and shareholders, will take more risks and put the financial system in greater danger.
There has also been much attention paid to the creation of a new Bureau of Consumer Financial Protection. This sounds like a good idea at first. We all want to ensure strong consumer financial protections.
Yet rather than working with regulators to strengthen existing consumer protection rules and crack down on unfair, deceptive and abusive practices, this provision adds another layer of bureaucracy and financial regulation that ultimately will be harmful for consumers — by raising their costs for financial products and limiting the types of financial products and services available to choose from.
Not only that, this bill increases the regulatory burden for banks — including community banks — that already are subject to 1,700 pages of regulations in just the consumer area alone. Under this bill, community banks would have to comply with an additional 27 new or expanded regulations, including new burdens on small business loans. No telling how many pages these new regulations will add or how much they will increase the cost of lending to small business.
Finally, this bill harms the very innovation and entrepreneurship that made our country successful and created one of the strongest economies in the world. It does this by limiting the ability of small startup companies to raise seed capital.
At a time when the unemployment rate is at 9.7 percent, the last thing Congress should do is make it more difficult for small businesses to start up and be successful.
I agree we need better regulation of our financial system. However, the financial regulatory reform bill that came out of the Senate Banking Committee does not achieve that goal.