Fwd: Enterprise Update: Rep. Ed Royce (R-CA) on Financial Regulatory Reform

Enterprise Update Eliminating barriers to enterprise and innovation Recent Updates VIDEO: A Wall Street Bailout Bill The Bill is Still Flawed How Bad is the Lincoln Derivatives Bill? Federal Workers Make Twice As Much VIDEO: GM Repaid Taxpayers with Tax Dollars In the Dodd Bill, "Bank" Could Mean Anyone Featured Research Rep. Ed Royce (R-CA) on Financial Regulatory Reform By Rep. Ed Royce As the Senate moves closer to another cloture vote on Senator Dodd's legislation, we are again reminded of the several flaws found in the Dodd-Frank approach to financial regulatory reform. Beginning with the rescue of investment bank Bear Stearns in the spring of 2008, the Federal government has committed trillions of taxpayer dollars to institutions like Fannie Mae, Freddie Mac, AIG, Citigroup and Bank of America, out of fear that the demise of any of these "too big to fail" institutions would trigger a systemic crisis and collapse of the global financial system. With the bailout of creditors domestically and overseas, we have seen an increase in moral hazard and a 78 basis point advantage in lower borrowing costs for those firms receiving government funds. Instead of learning from the failures of 2008, the legislation put forward will compound the moral hazard problem. Take the House bill that passed last December. Armed with a $150 billion bailout fund backed by the US Treasury, regulators would be authorized to "make loans to, or purchase the debt obligations of a systemically risky company; purchase its assets; assume or guarantee its obligations; take liens on assets or sell or transfer the company's assets." This is a huge amount of power left to the discretion of government officials. As my colleague Rep. Brad Sherman (D-CA) accurately described when the bill was first introduced, it amounts to "TARP on steroids." >> Click here to read the full report For more information, visit Heritage's Enterprise and Free Markets webpage, which features research, commentary, blog posts, charts and additional policy resources. Red Tape Rising The regulatory burden on Americans continued to surge during 2009, with record increases in costs thanks to both the Bush and Obama Administrations. Given ongoing regulatory initiatives at several agencies, it is very likely that this surge will continue. Click here for more information About The Heritage Foundation Founded in 1973, The Heritage Foundation is a research and educational institute -- a think tank -- whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense. The Heritage Foundation | 214 Massachusetts Ave NE, Washington, DC 20002 | 202.546.4400