A top Republican lawmaker wants the GOP to move on from its nearly decade-long obsession with killing the Dodd-Frank Act.
Rep. Patrick McHenry (R-N.C.), the GOP frontrunner to become the next chairman of the Financial Services Committee, said his party should instead focus on legislation that will help prevent the next economic crisis and addresses all the ways that technology is rapidly reshaping banking. Such policies might draw bipartisan support, unlike efforts to gut Obama-era financial regulations.
“We need to get out of this Dodd-Frank morass we've been in,” McHenry said in an interview July 11 at his office in the U.S. Capitol. “The next crisis will look different from the previous crisis, so we need to be forward-looking when it comes to legislating.”
Ever since former President Barack Obama signed Dodd-Frank in 2010, Republicans and some financial firms have sought to repeal the legislation or at least roll it back. But a major overhaul requires 60 votes in the Senate.
The GOP may have gone as far as it can in May in revamping the sweeping legislation. Congress approved a bill, backed by some Democrats, that mostly eases regulatory burdens on smaller banks, not the Wall Street titans largely blamed for causing the 2008 crisis. While that work was important, McHenry said, his colleagues need to move on to other issues in the next Congress if they want to get more laws passed.
Lawmakers have been jockeying for months to lead the House's powerful financial services panel, which writes legislation affecting banks, hedge funds, and stock exchanges. Current Chairman Jeb Hensarling (R-Texas) has announced he won't run for another congressional term.
McHenry, the committee's vice chair, is seen as next in line to hold the gavel. But McHenry has said he will wait until after the November elections to decide whether to pursue it or seek a higher leadership position, such as House whip. If Democrats wrest control of the House, Rep. Maxine Waters of California is in line to run financial services panel. Waters has repeatedly called for President Donald Trump's impeachment and been one of Congress's most vocal critics of big banks.
“I can work with Maxine,” McHenry said. “Maxine is going to have to make a decision, though, on how she intends to operate. I think there have been some dangerous comments she has made that I disagree with. She will then have to make a decision whether or not she is going to be a policy maker or simply resist.”
In the next Congress, McHenry said he hopes to continue his work on topics related to financial technology, an issue he says has backing from Republicans and Democrats. That could include tackling the question of how to regulate cryptocurrencies, where McHenry said there's a lot of “growth potential,” but also “a massive amount of fraud that is taking place.”
McHenry said more rules are needed around initial coin offerings and the trading of digital tokens. One of the thorniest issues is determining whether coins should be subject to the same stiff regulations that govern stocks. Securities and Exchange Commission officials have repeatedly argued that ICOs, in which companies raise money by selling tokens, are securities that should be regulated by the agency.
“Eventually Congress will need to step in to provide clarity. There has to be a clear break point between what is a security and what is a real world utility,” McHenry said. “We are not there yet, but we need to make sure we are getting all the data we can to be smart about how we legislate when it comes to crypto.”
While he declined to specify what exactly will prompt the next financial crisis, McHenry said rising interest rates will be a factor.
“In a rising interest rate environment, the pains of an institution becomes much more ominous,” McHenry said.
Selecting the next committee chairman can be a lengthy process. Fundraising plays a role in deciding who will be in charge, as committee chairmen are expected to raise campaign money for themselves and their colleagues.
McHenry is one of the most prolific fundraisers in Congress, having attracted $3.47 million since 2017, according to the Center for Responsive Politics. He has received $464,456 from the securities and investment industries. Still, he said the donations haven't influenced his policy views.
“There is no mistake that there is money in American politics,” McHenry said. “But my decisions are not born out of financial contributions.”
©2018 Bloomberg L.P. All rights reserved. Used with permission
To contact the reporter on this story: Elizabeth Dexheimer in Washington at email@example.com
To contact the editors responsible for this story: Jesse Westbrook at firstname.lastname@example.org; Gregory Mott