Rep. Steve Austria’s Position on the Financial Regulatory Reform Bill

By Steve Austria

This week, the Senate may consider Senator Chris Dodd’s (D-CT) financial regulatory reform legislation. The House of Representatives passed a financial regulatory reform bill last fall. The legislation proposed by Senator Dodd would essentially overhaul our financial system and place new, sweeping regulations on the banks.

The bill includes a $50 billion fund for bailing out firms Washington considers “too big to fail”, which will be paid for by levies on banks. It would also create an independent regulator housed at the Federal Reserve, which would essentially codify the bailouts used by the Fed to directly infuse money into firms like Bear Stearns, AIG, Fannie Mae and Freddie Mac. Concerns have arisen that this mechanism may simply add another layer of federal bureaucracy, allowing Washington to pick winners and losers in the financial industry.
By Rep. Steve Austria

While I agree that there needs to be more transparency and oversight within the financial industry and protections for consumers, more government involvement that only puts the American taxpayer on the line is not the only answer. Furthermore, giving more power to the Federal Reserve, a non-elected entity, to distribute funds to various firms, deviates away from its original mission, which is to provide oversight and guidance of monetary policy. Rather than adding to a government backstop, we need reform that strengthens consumer protections, helps protect the solvency of existing firms, and brings consistency to the regulatory structure.

Source: Email newsletter, April 23, 2010.

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