While interviewing Rep. Jeb Hensarling (R-TX) Tuesday morning, New Day co-host Chris Cuomo slammed a proposal that would roll back some of the Dodd-Frank regulations passed in response to the 2008 financial crisis.
The American public should have gotten used to the media acting as an advocacy group for illegal immigrants and gun control, but Cuomo took on the role of press secretary for Dodd-Frank, the massive regulation package passed in response to the 2008 housing crisis and subsequent recession.
If anyone should know about the housing crisis, it’s Cuomo, whose brother spearheaded a policy requiring Fannie Mae and Freddie Mac to purchase $2.4 trillion worth of subprime mortgages over the next ten years during his tenure as Secretary of Housing and Urban Development.
Ironically, less than 10 years after the implementation of this policy, the housing bubble burst. The geniuses in the Clinton administration should not have expected anything less when they forced banks to give mortgages to people who they knew could not pay them back.
When beginning his exchange with Rep. Hensarling, who serves as chair of the House Financial Services Committee, Cuomo recited the liberal talking points that regulation is a good thing, asking, “But some regulation exists for good reason, right?” Hensarling repeatedly stressed that more capital, not federal micro management, serves as the essential ingredient for rebuilding the housing industry.
The Congressman pointed out that the Dodd-Frank regulations have done a great deal of harm to smaller community banks and credit unions, saying “we’re losing one a day”, arguing that “a community bank that’s .002 percent the size of J.P. Morgan shouldn’t be laboring under a similar set of regulatory burdens.” Cuomo conceded that Hensarling had a valid point, but added: “you’re letting a lot of big banks get away with regulation with what you’re proposing right now.”
While Cuomo tried to use the worn-out liberal argument that rolling back Dodd-Frank regulations will benefit the big banks, Hensarling pointed out that the big banks oppose the proposed “modest recalibration” of Dodd-Frank designed to help community banks and credit unions.
The Texas lawmaker has long served as an advocate for the repeal of Dodd-Frank, penning an op-ed in the Wall Street Journal titled “After Five Years, Dodd-Frank is a Failure”; which argues that the law has “crushed small banks, restricted access to credit, and planted the seeds of financial instability.”
Cuomo closed his interview with Hensarling by saying “It’s not about making them enemies. It’s about keeping the rules fair.” A slight alteration of that comment would explain how the Democrats and the media feel about Dodd-Frank, “it’s about keeping the rules.”
CNN's New Day
7:29 a.m. Eastern
CHRIS CUOMO: Let’s pick up one more topic while I have you. Make the case how, you know, I get that less regulation sounds like the panacea, especially on the political right. But some regulation exists for good reason, right?
REPUBLICAN CONGRESSMAN JEB HENSARLING (Tex.): Well, of course.
CUOMO: And one of those categories has to be what happened coming out of 2008. I covered that financial mess very closely when I was at ABC News. The banks were out of control. You had no idea how they were using leverage. They were making bets they couldn’t cover and the American taxpayers paid the price and they mostly got off scot-free. So you put in these controls and restrictions to make sure that the banks can sustain their own risk. Now you want to roll them back. Why?
HENSARLING: Well, number one, it probably doesn’t surprise you, I don’t agree with your narrative. I mean, what we had was, we had an erosion of traditional prudential underwriting standards in real estate. A lot of that was driven by the affordable housing goals of Fannie and Freddie when Barney Frank famously said “Let’s roll the dice.” Well, we did and America lost big. Second of all, probably only with the exception of nuclear power and the practice of medicine, banking has always been one of the most highly regulated industries. The answer, Chris, is more capital. We need more capital. Hold on, hold on. We need more capital, not micro management.
CUOMO: Jeb, people had no idea what they were doing. I covered the meetings where Paulson tried to explain to you guys what was happening with derivatives. You’d never even heard of them.
HENSARLING: Okay, well frankly, I do know what a derivative is.
CUOMO: Now you do.
HENSARLING: I happened to be...No frankly I knew at the time. I’ve been a member of the House Financial Services Committee for 15 years.
CUOMO: You know a lot of people didn’t. They didn’t even know what was happening.
HENSARLING: But the answer is not Federal micro management, number one, it is more capital. That’s what we put in our House bill. That’s one of the reasons our House bill has been opposed by the big banks. Many of them were quite happy with the status quo. Here’s the bottom line. Frankly, I wish we were looking at a wholesale repeal of Dodd-Frank but we’re not. We’re looking at a very modest recalibration that’s going to help community banks and credit unions and we’re losing one a day. Let’s put it this way, Chris. I don’t believe in too big to fail banks. But if I did, it would be limited to maybe eight or nine banks. I mean, a community bank that’s .002 percent the size of J.P. Morgan shouldn’t be laboring under a similar set of regulatory burdens. And again, we’re losing one a day.
CUOMO: That may be a fair point but you’re letting a lot of big banks get away with regulation with what you’re proposing right now.
HENSARLING: How? How?
CUOMO: Because you are reducing the risk that they need to show financial sufficiency and health under the stress test.
HENSARLING: Show me what’s in the Senate bill, tell me what’s in the Senate bill, that came out of committee that’s helping the big banks because I don’t see it.
CUOMO: If you reduce...
HENSARLING: So iff you know something, share it with me.
CUOMO: No, no, no. Listen, I mean, it’s not a, you don’t have to play a game about it. What’s in the language is pretty clear.
HENSARLING: It’s not a game, you just said it.
CUOMO: If you reduce the requirements for my financial stress test, they’re going to benefit from it. And you also have to look at how, I get you about small banks, I know that certain community lenders have been adversely affected by this. I get it and I get that they didn’t start the process.
HENSARLING: Yeah, they’re going out of business.
CUOMO: I understand that but there are ways to address that where you don’t let the big banks be able to play with other people’s money again. That’s all I’m saying.
HENSARLING: Again, the big banks, many of them, have said they’re very happy with Dodd-Frank and I think you know this, Chris, since Dodd-Frank was passed, the big banks are bigger. The small banks are fewer. They have the ability to use this as a competitive advantage. I mean, go and look at what people have said at Goldman and Sachs, most recently the head of the Bank of America has said he’s very fine with Dodd-Frank. So again, what this is doing is it’s helping capital formation for small businesses, for startups. I think it will help some regional banks and it will help certainly small community banks and credit unions. But I haven’t seen anything in the Senate bill, and again it hasn’t come off the floor yet but I haven’t seen anything in the Senate bill that anybody with a straight face can argue is helping the big banks. Listen, I don’t consider them friend, I don’t consider them foe. I’m sitting here trying to help the economy.
CUOMO: It’s not about making them enemies. It’s about keeping the rules fair. But let’s do this, Jeb. I’m out of time here. Let’s see how it comes out of committee, let’s see how it gets argued on the floor and please come back and make the case to the American people.