WASHINGTON (CN) - As House Republicans complained at a subcommittee meeting on Wall Street reform that the law constricts competition between banks, Democrats balked that the regulations have barely gotten off the ground.
Passed in 2010 to create a consumer protection bureau, the Dodd-Frank Wall Street Reform and Consumer Protection Act issued new regulations for banks, mortgage companies, payday lenders and credit card lenders. The act takes its name from its biggest proponents, former Sen. Chris Dodd, D-Conn., and former Rep. Barney Frank, D-Mass.
Dodd-Frank aimed to curb credit card fees, end unfair rate hikes, clariy rules on student loans, eliminate hidden penalties and fees in mortgage agreements, and give shareholders a say in executive pay.
But Bob Goodlatte, R-Va, blasted the reforms Monday at a hearing of the House Subcommittee on Intellectual Property, Competition and the Internet.
"Unfortunately, Dodd-Frank injects government bureaucrats into the decision-making process in the flow of capital," said Goodlatte, who chairs the subcommittee. "This raises unnecessary hurdles to our economic recovery and distorts competition in the financial services market."
The Democratic ranking member Mel Watt, D-N.C., called the hearing "much ado about nothing."
Watt and the other subcommittee Democrats defended stricter regulation of big banks, and asked Republicans to give the 2-year-old law time to prove its worth.
"I'm happy to hear from the witnesses on this panel to hear their theories on how things may pan out with 'too big to fail,'" Watt said. "The fact is that I think a more appropriate title for this hearing would be 'too early to tell.'"
The subcommittee heard testimony from Ellis Gutshall, a small banker from Roanoke, Va.; Professor Adam Levitin of the Georgetown University Law Center; and Alex Pollock, a resident fellow with the American Enterprise Institute who authored "Boom and Bust," a short book available for purchase for $9.95 through online retailers, according to his testimony.
Gutshall testified against Dodd-Frank, stating that the law creates "excessive regulations" that "zaps staff and resources." He said the money should have gone to "meeting the needs of the bank's customers."
Rep. Hank Johnson, D-Ga., explained that the law intends to assist community banks while holding big banks responsible for predatory lending practices and financial corruption.
Watt "I don't understand why the other side of the aisle would bring a community banker up here to help in the effort to get rid of Dodd-Frank, which is mostly concerned with banks that are too big to fail," Johnson said.
Levitin, a Dodd-Frank supporter, mapped the financial distance between community banks and the big boys, while Pollock pointed out the law's failures and promoted his book.
Rep. John Conyers, D-Mich., pointed out that "JPMorgan Chase lost $2 billion with acknowledged irresponsible bets on the derivatives market."
"Chase, CitiGroup and other American firms may have undertaken similar actions," Conyers said. "And so what I am hoping will happen is that we will now sleep more comfortably in our beds at night now that Title X of Dodd Frank has not developed the horrible results that have been predicted."
Title X, also known as the Consumer Financial Protection Act, creates federal oversight in the financial industry.
Watt spoke about legislators' hope for the bill back in 2010.
"When we were doing Dodd-Frank, it was indicated that every 27 years or so there was going to be a crisis because you regulate, and then you deregulate, and then the profit motive becomes a lot more salient than the regulatory motive," Watt said as the hearing drew to a close. "And over time that's what happens throughout the history of our country. We figure Dodd Frank is good for about 27 years if we're lucky."