Letter to Chairman Jeb Hensarling: The Financial CHOICE Act

By at 12 September, 2016, 9:03 pm

UPDATE: On September 13, 2016, the Financial CHOICE Act was advanced by the Financial Services Committee.


The Honorable Jeb Hensarling


House Financial Services Committee

United States House of Representatives

Washington, D.C.   20515


Dear Chairman Hensarling:

The Small Business & Entrepreneurship Council (SBE Council) strongly supports the Financial CHOICE Act. This is an important bill that will truly reform rules governing the financial system, encourage innovation across the system, vastly improve access to capital for entrepreneurs and small businesses, and transform a regulatory structure that lacks accountability, is too secretive, and ignores its responsibilities concerning small businesses.

Dodd-Frank imposed nonsensical government regulation and controls on the financial industry that ultimately hurt entrepreneurs and their workforce. Rather than address the root cause of the financial meltdown and hold bad actors accountable, Dodd-Frank added layers upon layers of unnecessary red tape and bureaucracy on innocent businesses.

As you well know, access to capital remains a challenge for startups and growing firms. Thankfully the Financial CHOICE Act addresses critical areas to improve capital formation while strengthening our capital and financial markets.

For example, onerous Dodd-Frank regulations are unfairly burdening small banks, which has led to tightened loan availability and higher capital costs for small businesses. The Financial CHOICE Act makes key revisions that will allow community banks to fully get back to business, which means financing the startups and local small businesses that are critical to the economic growth of local communities. Furthermore, the Financial CHOICE Act incorporates needed Securities and Exchange Commission (SEC) reforms that will make SEC rules and compliance more rational, streamlined, and fair. In the end, these changes will improve capital formation by modernizing rules and processes that have created barriers for raising capital.

The Consumer Financial Protection Bureau (CFPB) has become a secretive and demeaning entity that desperately needs accountability and transparency. The CFPB is not considering the impact of its rules and actions on small businesses, which (again) negatively impacts the cost and availability of capital. The CFPB’s budget is cloaked in mystery, and at the same time it uses taxpayer dollars to capture and collect data and information that impinges upon the privacy of almost every American consumer. Thankfully, the Financial CHOICE Act proposes fundamental measures that require the CFPB to operate under full transparency and with a modern vision. In fact, the bill would make the secretive CFPB a bipartisan commission that is subject to congressional oversight and appropriations, and balance its mission with one that includes the protection of competitive markets. This dual mission will provide a check against hyper-regulation, red tape, and general mission creep.

The Financial CHOICE Act also seeks to remedy other ills and mistakes on the financial regulatory front. For example, it would end “too big to fail” and its commensurate taxpayer bailouts, and replace it with a new subchapter in bankruptcy law for large, complex financial institutions; provide regulatory relief from Dodd-Frank burdens and complexities for “well-managed, well-capitalized financial institutions;” and end regulatory politicization, overreach and secrecy by removing the Financial Stability Oversight Council’s ability to anoint financial institutions as “too big to fail” through the designation of being “systemically important.”

On broader regulatory modification issues, we believe applying a REINS Act check to financial regulations will provide the engagement and oversight by Congress that are needed to make for better regulations. Applying sound cost-benefit principles to financial regulations will also add a sensible analytical step that will produce more thoughtful rules.

Entrepreneurship continues to struggle following the Great Recession, and small business growth is weak. Without capital and confidence in our economy, many potential entrepreneurs are sitting on the sidelines while existing small businesses cannot adequately plan for the future, which includes finding the capital they need to invest, grow and compete. One important principle in the executive summary of the Financial CHOICE Act states it best: “Simplicity must replace complexity, because complexity can be gamed by the well-connected and abused by the Washington powerful.” Small business owners and entrepreneurs definitely agree.

The Financial CHOICE Act is good for small businesses and good for entrepreneurs. Therefore, it is good for the U.S. economy and the financial security of all Americans. Thank you Chairman Hensarling for your leadership. SBE Council looks forward to working with all members of Congress to enact the Financial CHOICE Act into law.


Karen Kerrigan, President & CEO


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