The head of the Financial Crisis Inquiry Commission told a Senate committee on Tuesday that the Dodd-Frank financial reform law must “be fully implemented” to avert another meltdown in the U.S. economy.
Commission Chairman Phil Angelides said the reforms outlined in Dodd-Frank are “strong and needed” and address the conclusions reached by the commission.
Republicans, emboldened by election victories, have been pushing for revisions, or even repeal, of the Dodd-Frank law.
Democrats contend that any attempt to water down or dismantle Dodd-Frank would be “dangerous and irresponsible,” said Tim Johnson, the South Dakota Democrat who leads the Senate Banking Committee before which Angelides testified.
“In the wake of this crisis, it is critical that the Dodd-Frank law be fully implemented, with sufficient resources for proper oversight and enforcement, to help prevent a future crisis,” Angelides said.
The commission interviewed hundreds of witnesses, held several public hearings and reviewed millions of pages of documents in order to conclude in its report, issued more than three months ago, that human inaction and action, misjudgment and the ignoring warning signs on the way to disaster by many parties including regulatory agencies and Wall Street caused the crisis.
“The report very strongly articulated the view that it was not as some on Wall Street would have us believe, a perfect storm,” Angelides said. “For me the most compelling finding of this report was the avoidability of this crisis.”
Repealing sections of Dodd-Frank would take the financial system back to where it was before the crisis and make the market more susceptible to threats posed by systemic risks, Ponzi schemes and reckless financial firms, Johnson said.
“As costly as the Great Recession has been, we simply not afford to go back to the old financial system that destroyed millions of jobs and cost the economy trillions of dollars,” Johnson said.
Republicans hold a different view.
Sen. Richard Shelby, Alabama Republican, an outspoken critic of Dodd-Frank, sharply criticized the sweeping changes enacted by the law.
“Today, the costs and unintended consequences of Dodd-Frank continue to mount, while the benefits of the legislation remain unclear,” Shelby said.
Shelby called the FCIC “a missed opportunity” to respond to the financial crisis with effective legislation. Shelby, who called for the Senate Banking Committee to conduct its own investigation on the financial crisis, pointed out that Congress approved Dodd-Frank several months before the commission finished its report. The legislation was drafted without an understanding of the underpinnings of the financial crisis and instead of being a comprehensive solution, Dodd-Frank turned into a partisan agenda, he said.
“Predictably, without a clear record to justify specific provisions,” Shelby said, “the Dodd-Frank legislation merely became a wish-list of reforms long sought by liberal activists, special interests and federal bureaucrats.”