By J. Preston Carter, J.D., LL.M.
"The Financial CHOICE Act is a major step in the right direction for the U.S. economy," according to a paper written by Norbert J. Michel, at The Heritage Foundation. In his Backgrounder paper—Money and Banking Provisions in the Financial CHOICE Act: A Major Step in the Right Direction—Michel cites as the core component of the proposed reform a regulatory off-ramp, a provision that gives regulatory relief to banks that choose to hold higher equity capital.
This provision exempts banks from "onerous regulations" of the Dodd-Frank Act if they meet a higher capital ratio, says Michel. There is little justification for heavily regulating firms that absorb their own financial risks, he added. Higher capitalized banks do exactly that, Michael said, lowering the likelihood of taxpayer bailouts.
Other key points in the proposal, according to Michel, include: replacing the Dodd–Frank Act’s orderly liquidation authority with an improved bankruptcy process for large financial firms; improving the Federal Reserve Board’s emergency lending authority; and improving the Fed’s regular operating procedures, essentially by adopting the text of the 2015 Fed Oversight Reform and Modernization Act.
A discussion draft of the bill was released in June by House Financial Services Committee Chairman Jeb Hensarling (R-Texas).
