At a National Journal LIVE event Tuesday, lawmakers from both sides of the political aisle discussed possible regulatory relief from unintended consequences for both community banks and insurance companies as part of the Dodd-Frank financial-reform law.
The event, held at the Newseum and underwritten by Zurich, featured Republican Banking Committee Chairman Sen. Richard Shelby and Democratic Rep. Emanuel Cleaver, who both discussed the need for regulatory relief.
Shelby said one of the main problems he found with Dodd-Frank was regulatory overreach for smaller banks.
"They're being treated just like one of the huge banks that would probably cause, if it failed in a catastrophic way, systemic risk in the economy," Shelby said in conversation with National Journal's Ron Fournier. "I don't know of any financial institution that has gone under that has adequately capitalized, well managed, and well regulated. You cannot legislate and regulate against all potential risk."
Another change Shelby said he would like to see to Dodd-Frank would be to put the Consumer Financial Protection Bureau under congressional appropriation instead of having it receive money from the Federal Reserve, which was recently proposed in the House GOP budget, calling the money from the Federal Reserve "a spigot."
Dodd-Frank also created the Financial Stability Oversight Council, which has the ability to designate nonbank companies as "systemically important financial institutions" and therefore subject to increased regulation. So far, the council designated three companies in the insurance business—AIG, Prudential, and MetLife—as systemically important institutions, but earlier this year, Metlife announced it would sue the U.S. government to challenge the designation.
Cleaver said, while he believed reform of the financial system was necessary and that Dodd-Frank had reached that goal, there could be tweaks to the law to make sure there is not overregulation of insurance companies.
"I don't think most of the insurance companies should have to fall victim to some of the regulations," Cleaver said. But Cleaver said, despite agreement among members of Congress that there needs to be regulatory reform and relief, Congress has become so polarized that it has made it difficult to come to any sort of agreement. "We practice this partisan political tribalism to the point we can't get anything done. The changes ought to be in the way we think."
In addition to discussions of Dodd-Frank and insurance companies, the discussion also briefly touched on the recent violence in Baltimore after the death of Freddie Gray.
"There's a lot of frustration that comes from a lack of economic opportunities, lack of education, lack of job training," Shelby said, also questioning if it was a product of gangs. "I don't know the answer to it. I just know that's not good for society. That's not good for the image of any city or town."
Cleaver, who represents Missouri—including the town of Ferguson, where 18-year-old Michael Brown was shot last summer and which was the location of similar protests and riots—said situations like the one in Baltimore should be a time for members of both parties to stand together to take action.
"The situation in Baltimore is not anywhere unique to Baltimore," he said. "The problem is we really neither talk about how we improve race relations nor do we do anything about it."
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Eric Garcia is a staff correspondent for National Journal. He previously was a transparency reporter for MarketWatch, where he reported on financial regulation issues. His work has also appeared in the Southern Political Report, Salon, the American Prospect and the New Republic. He is a graduate of the University of North Carolina at Chapel Hill, and covered politics for its campus paper, the Daily Tar Heel.