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32 WITNESSES AT HOUSE COMMITTEE HEARING TESTIFY OF DODD- FRANK'S ADVERSE EFFECTS Witnesses at a series of recent House Finan- cial Services Committee hearings testified the Dodd-Frank Act has "reduced financial stability" and made Americans worse off financially in the controversial law's first five years of existence. e first hearing titled, "Dodd-Frank Five Years Later: Are We More Stable?" was the first in a series of three full committee hearings to examine the impact Dodd-Frank has had on American consumers and the country's financial system and economy since President Obama signed it in to law in July 2010. e focus of the hearing was on how the 400 regulations enacted in the 2,300-page law are a threat to the country's financial stability. "What is undebatable is the fact that since the passage of Dodd-Frank the big banks are now bigger; the small banks are now fewer," Committee Chairman Jeb Hensarling (R-Texas) said in his opening statement at the hearing. "In other words, even more banking assets are now concentrated in the so-called 'too big to fail' firms. Pray tell, how does this improve financial stability?" One of the witnesses, Todd Zywicki, Profes- sor of Law at George Mason University and Mercatus Center Senior Scholar, said American families were not better off five years after Dodd- Frank went into law. "Instead, the overall impact of Dodd-Frank has been to slow our economic recovery, raise prices, reduce choice, and eliminate access to the financial mainstream for American families," Zywicki said. "And low-income Americans have been hit the hardest." While supporters of Dodd-Frank say the law has put an end to "too big to fail," members of the committee said Dodd-Frank enshrined "too big to fail," into law, leaving taxpayers exposed to the risk if the economic stability of financial institutions designated as "too big to fail" was to be threatened. One key takeaway from the July hearing was that the drafters of Dodd-Frank claimed the financial crisis was caused by a lack of regulation, when in reality financial regulations increased in the decade preceding the recession. "Although a few modest improvements have been made to increase financial stability, I believe Dodd-Frank, no net, has reduced financial sta- bility," said Mark Calabria, director of financial regulation studies at the Cato Institute, one of the witnesses at the hearing. "e reason for such is a combination of both errors of commission and omission. Moral hazard has been increased by Dodd-Frank's expansion of the financial safety net and increased concentration of risk into fewer entities, while the primary 18 causes of the crisis were largely left untouched. I fear if we continue along our current path, we are almost certain to see another financial crisis sometime in the next decade." Another key takeaway from the hearing was that the new bureaucracies borne out of Dodd- Frank, such as the Consumer Financial Protec- tion Bureau and the Financial Stability Oversight Council, operate without a system of checks and balances, yet have the ability to "fundamentally alter" the U.S. economic landscape and affect the financial livelihood of millions of Americans. e "shadow regulatory system" created by Dodd- Frank poses more of a threat to the Americans' financial well-being than the "shadow banking system" does, as the Obama administration claims," according to the committee. e committee also claimed at the hearing that a key portion of Dodd-Frank, the Volcker Rule, has caused a lack of liquidity in capital markets, which gives them less capacity to deal with economic shocks. "After the bill that was to become Dodd- Frank was reported out of the Conference Com- mittee, Chris Dodd famously said, 'No one will know until this is actually in place how it works,'" said Paul Atkins, former commissioner of the U.S. Securities and Exchange Commission, a witness at the hearing. "Five years later we still do not know the full effects the Dodd-Frank Act will have on U.S. capital markets. We do know, however, that the costs of Dodd-Frank have been borne not just by Wall Street, but by ordinary investors and businesses of all shapes and sizes." e second hearing titled, "Dodd-Frank Five Years Later: Are We More Prosperous?" included witnesses Phil Gramm, senior partner at U.S. Policy Metrics and former U.S. Senator; R. Bradley Miller, Of Counsel with Grais & Ellsworth and a former member of Congress; and Peter Wallison, Arthur F. Burns Fellow in Financial Policy Studies at the American Enter- prise Institute. A recurring theme at the hearing was that Dodd-Frank represented overregula- tion, which has stifled economic recovery rather than accelerated it as was intended. "By any measure we are today experiencing the weakest recovery of a post-war era," Gramm said. "Had this recovery simply matched the strength of the average of the other ten recoveries since World War II, 14.4 million more Americans would be working today and the average income of every man, woman and child in the country would be $6,042 higher. e incomes of the poor, middle in- come workers, women, and minorities have fallen even during the recovery, an unprecedented event. All this economic carnage has occurred despite a doubling of the Federal debt and an expansion of the Federal Reserve Bank balance sheet and the monetary base at rates never before witnessed." Wallison presented a chart that compared recovery from the financial crisis of 2008 with that of previous crises and noted that from 2009 until the passage of Dodd-Frank in July 2010, economic recovery was on the same pace as previous recoveries. He contended that recovery began to slow down when Dodd-Frank was signed in to law. "I believe that all the new regulation added

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