Washington, DC -- (ReleaseWire) -- 07/26/2016 --BENNETT: Andrew Langer has been involved in free market and limited government causes for nearly 20 years, and since 2008 he has served as the president of the Institute for Liberty. Andrew has testified before congress nearly two dozen times, and spoke at the historic 9/12 Taxpayer March on Washington. Prior to IFL, he was the principal regulatory lobbyist for the National Federation of Independent Businesses, the nation's largest small business association, and he has also worked with foreign governments on improving their small business sectors. The Institute for Liberty works on a variety of issues, including promoting and protecting small business, linking trade and prosperity, and tilting against the regulatory state, but at the organization's core—and Andrew's—is the desire to promote freedom and individual rights. Andrew, welcome to Financial Myth Busting.
LANGER: Thanks for having me on.
BENNETT: One of the constant themes during the Obama administration, and one which we're sure to hear again during this week's convention from the Hillary campaign, is that after the housing bubble the administration passed Dodd-Frank and got tough on Wall Street. This talking point seems never to be challenged, but is it even true? Are banks really being restricted from making irresponsible loans? Are future bailouts definitely off the table? Does outright fraud ever actually result in jail terms? What's your take on hype about Dodd-Frank?
LANGER: It's so funny, because I had a conversation with somebody this morning in which we were talking about pushing back against the Democratic talking points, and showing how Democratic policies were actually harming individuals. Dodd-Frank was passed. It created all of these banks that are now too big to fail, so that in essence there will be bailouts in the future. Especially because you have another Democratic talking point which is continuing to push banks to make marginal loans, and remove risk from lending practices.
The end result has been that literally several million people have been shut out of the banking industry. Folks have lost the ability to open up a checking and savings account to get access to consumer credit, especially guaranteed consumer credit. They are moving to so-called prepaid debit cards, and things like that, as more restriction is put on those financial products. So you've created a situation in which millions of people have entered this realm of being forced into riskier areas. At the same time the Democrats are trying to, as I said, remove risk from financial services, which is causing businesses to go out of the marketplace. So smaller banks are going out of business, there's greater consolidation in the industry, and consumers are left with fewer choices in the marketplace.
BENNETT: From my perspective, the biggest effect of Washington's "rescue of banks" supposedly too big to fail, is that these banks are doing well, their execs are being handsomely compensated, and yet none of that prosperity is being felt on Main Street. Is this proof of the administration's theory that these big banks need to be propped up in order for a larger economy to prosper?
LANGER: It certainly is the theory that the largest actors in the marketplace are the ones who are going to gin the rules in their favor. Other folks call it corporate welfare, we call it crony capitalism. The reality is that consumers are best helped by a greater number of choices in the marketplace. When you don't punish bad actors, obviously that sends the message that bad acting can go completely, not rewarded, but unpunished, so it incentivizes that. Especially when you create a multi-tier system in which the Democratic nominee herself can go unpunished for reprehensible behavior that would have sent other people to jail, certainly that sends the wrong message to folks regarding their behavior.
BENNETT: Speaking about Hillary, to go a bit off-topic, she named Senator Tim Kaine as her VP running mate. Does Kaine help? What do you think he adds or subtracts from the ticket?
LANGER: I think what Kaine does is mask the greater issue, which is Hillary Clinton's relationship with Wall Street. If you are concerned about financial regulation you've got to be deeply deeply troubled by Hillary Clinton saying one thing at the top of the ticket, and doing something entirely different. I don't think anybody expects Tim Kaine to be the kind of stalwart that let's say Elizabeth Warren would be, even if you think Elizabeth Warren would have helped matters, which I'm not sure she would have, because Lord knows the Consumer Financial Protection Bureau that Warren started and ran really hasn't done much in order to actually protect consumer's finances. What it did was hound a lot of people. So I'm not sure Kaine really brings much to the ticket, except a nice, smiling face, and a warm body to go up against Mike Pence.
BENNETT: There's a new bill in Congress called the Financial Choice Act, which was introduced last month by representative Jeb Hensarling, and is designed to replace Dodd-Frank. How does the Financial Choice Act achieve what Dodd-Frank sought, which was, I think, a well regulated Wall Street without all of the failings we've discussed?
LANGER: Well I think the Financial Choice Act does what it says, which is rare when it comes to consumer choice laws or legislation that are out there. It actually does create greater choices, and fixes some of these deficiencies in Dodd-Frank, and namely the restrictions that have hamstrung smaller banks, and smaller financial institutions. Allowing them to A, incorporate risk into their financial practices; and B, offer a greater series of products. So essentially dealing with this issue of the vast numbers of people who are un-banked. It's one of those things where as the CFPB and Treasury under the auspices of Dodd-Frank were going after certain lending institutions, things like check cashing businesses.
You have even democrats on the various financial services committees go, and look, and say oh my goodness, we've created a situation in which we have an urban marketplace in which folks are unable to even cash their paychecks. That's a situation that has to be addressed, and it has to be addressed in a way that doesn't provide big government, anti-competitive solutions. That's the other way of looking at it. It's one of those things where you can see it coming down the pipeline, as you have the Center for Responsible Lending for instance. Crafting policy for the federal government which ultimately will benefit them, and their supporters, but really again won't benefit consumers in the long term.
BENNETT: What I like about this bill is that it actually rewards banks for being well capitalized, and it's also freeing these institutions from that tangled web of regulation, which was originally meant to ensure best practices. It makes sense, because the whole reason banks get into trouble is the government actually encourages banks to keep very small reserves, which makes them liable to runs, and ultimately bankruptcy. Do you think banks will actually find this a worthwhile tradeoff if it gets passed?
LANGER: I certainly think so. One of the things I'm fond of saying is that even the most well intentioned policies eventually bump up against very real realities. We see this time and again, folks come in without any understanding of the way a marketplace actually works, how it functions. They create what they think are well intentioned policies, and some of them have a nefarious intent that are couched in well intention right away. But setting aside motivation, let's assume for a moment that folks have the greatest motivations at heart, eventually those intentions bump up against a reality. We see this time and again, not just in financial services, but in a whole realm of areas. So yes, I think that this is a good start in many ways. It will free up these institutions, and give them the incentive to do good things when it comes to market practices, as opposed to doing very destructive things.
BENNETT: I think another consequence of Washington's heavy handed approach in regulating, is that they are creating so many burdensome regulations that smaller banks are actually going out of business or they're merging. They just can't stay out on their own. Do you think that's actually a good selling point to get this act passed?
LANGER: I think it's a good selling point. I think, again, when we were going down this road in 2008, 2009, 2010, one of the things we were talking about was creating banks, making sure the banks were not too big to fail, of course we had the direct opposite effect. So anything which is going to give these smaller organizations more of an opportunity to get involved, that's a good thing. I want to add to this the fact that it's not just direct regulatory costs that are the issue, but it's the lost opportunity cost as well. Our research has shown that for every dollar in direct regulatory cost there's a $19 multiplier in lost opportunity cost in terms of the economy. No one is saying we should exist in a zero regulation environment, but if we did exist in a zero regulation environment research has shown that our economy would be roughly three times the size that it is now.
BENNETT: To your point, big banks have gotten bigger since Dodd-Frank became law nearly six years ago, I don't think people realize that.
LANGER: Well that's exactly it. I mean the folks who do realize it are the ones who have lost their bank account as a result of things like this. We deal with the issues of Dodd-Frank, we deal with things like Operation Choke Point, and how that has harmed consumers. Again, regardless of whether or not the intention was nefarious or not the stated purpose was X, the deliverable was Y, and when things don't have the effect that you intended then we have to go and revisit them in order to change course.
BENNETT: Andrew, can you elaborate on Operation Choke Point for our listeners?
LANGER:Sure. Operation Choke Point was a joint operation of the Department of Treasury and the Department of Justice. It was ostensibly out to try to deal with fraud without actually going and prosecuting fraud. What they would do is they would bully our credit card payment processors and small banks, and actually some large banks as well, by threatening them with lots of bureaucratic red tape if they didn't shut down the bank accounts, and credit card payment processing accounts of industries that the three agencies said had a higher risk of fraud. What the House Financial Services Committee discovered was that in fact they were really targeting industries with which they had an ideological beef.
BENNETT: Thank you, Andrew. That point is actually well taken based on what we've been talking about, that we need to be regulated. Even my belief with the SEC. I think the SEC on a whole does good work. I think that there are pockets of negativity in there where people are working unaccountably, and not being watched. So I think that any new rules, and regulations, and acts that are being proposed, all of us need to be open-minded about it. This is actually in the Declaration of Independence. "...when a long train of abuses and usurpations, pursuing invariably the same Object, evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."
Americans are certainly dissatisfied with what's going on here in America. According to a Gallup poll released last week on July 21st, only 17 percent of Americans are actually satisfied with the state of affairs in the US. That means 83 percent of Americans are not satisfied. It is my belief that this is why we're seeing civil unrest. It's something that seems to baffle the media, which I don't understand, because they can see it for themselves. I guess they just don't want to know the truth.
For over a quarter century, Dawn Bennett has been successfully guiding clients through the complexities of wealth management. Her unique vision and insight into market trends makes Bennett a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to her highly regarded weekly talk radio program - Financial Mythbusting. Through prudent and thoughtful advice, Dawn Bennett has strived to consistently provide the highest quality of guidance.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
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