Our 10th District Congressman is a VIP on Wall Street. As vice chairman of the House Financial Services Committee, Rep. Patrick McHenry is intimately familiar with the wish list of America’s financial titans. How is he responding?
McHenry has pleased Wall Street with years of resistance to the finance sector overhaul enacted by 2010’s Dodd-Frank legislation. With Donald Trump’s election, McHenry’s objections have taken on a nationalist tone. On Jan. 31, McHenry sent a blunt letter to Federal Reserve Chair Janet Yellen admonishing her to “cease all attempts to negotiate binding standards” for financial regulation in “international forums” of “global bureaucrats in foreign lands.”
Actually, the global system is only as safe as its weakest link. In 2008, we learned that the U.S. financial system was indeed that weakest link. Since then, bank regulators everywhere have collaborated to strengthen bank finances. The regulatory work McHenry mistrusts has already resulted in a global banking system with substantially more net worth and a correspondingly greater capacity to absorb unexpected losses without bailouts. This spring, regulators will finish writing the tougher capital standards.
We need to protect the financial system that holds our savings, funds our homes and cars, and delivers capital to the businesses that employ us. One of the most powerful measures we can take to protect the system is to require that banks have substantially more net worth than in the 2000s. McHenry is telling Yellen to put the brakes on that effort. That could cripple years of worldwide effort to make banks stronger.
We need to protect individual investors from “advisers” who steer them to investments based on the commissions they’ll receive. Financial advice must have a single goal: making the investor better off. McHenry disagrees with that principle. He wants to restore the mind-boggling policy that would allow advisers to pursue their own interests while investing their clients’ money.
We need to protect consumers who need credit: mortgages and credit cards, auto loans and payday loans. The financial industry has repeatedly exploited fine-print tricks and traps to extract unearned revenue from confused consumers. Not everyone has time to master financial contracts and see through the scams. Consumers who trusted the financial giant Wells Fargo were duped by the millions as Wells secretly opened unwanted accounts in their names. The government uncovered the game and went after the bank with full force. Nevertheless, Congressman McHenry has made a special effort to diminish or destroy the Consumer Financial Protection Bureau that helped lead the charge.
We do not need to protect the profits of banks and finance companies, which recently amounted to fully 28 percent of American corporate profits. That’s a fat bottom line for an industry that’s basically a utility, moving money to where it’s needed in the real economy of goods and services. One secret to outsized profitability is weak regulation that encourages risky speculation and unproductive banking practices.
Let’s encourage Rep. McHenry to keep nationalism out of bank regulation, keep Wall Street’s wish list in its place and focus hard on protecting the things that matter to ordinary people.
— Richard Genz