The year 2008 found Americans enjoying the good life. Money was flowing, credit was easy and consumers were delighted with their buying power.

The year 2008 found Americans enjoying the good life.  Money was flowing, credit was easy and consumers were delighted with their buying power.
Some of the happiest were carefree consumers who were pleasantly surprised to find that they could make their distant dream of becoming homeowners a reality.
This home owning dream became a nightmare as high-risk borrowers couldn’t meet their mortgage payments and began defaulting on their loans.  Housing prices had risen during the boom but dropped sharply during the bust that followed, leaving many homeowners with mortgages far exceeding the value of their homes.  Many decided to walk away from their homes and investments.
This created a domino effect as lenders up the chain to Wall Street had foreclosed houses instead of income from mortgages, causing the banking system to fall into chaos.
Insurance, money-market funds and speculative trading at banks depended on government support.  This left bank regulators with two disastrous options: bankruptcy or bailouts.  Since these lending institutions were deemed “systemically important” (too big to fail”), the government chose the costly bailout.
Following the financial crisis, lawmakers enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act that offers the additional option of orderly liquidation.
Under the Orderly Liquidation Act, the Federal Deposit Insurance Corporation can step in during an emergency to take immediate control of the bank. This prevents emergency funding from coming from taxpayers, since the law requires other financial firms with a stake in the failing bank to pay back the costs.   Regulators can remove executives and force employees to pay back bonuses.  The CHOICE Act would do away with the Dodd-Frank liquidation authority.
Dodd-Frank requires banks to have enough cash on hand to survive a panic, restricts banks' trading operations and provides added oversight for all systemically important institutions.
In June the House of Representatives passed HB10, the Financial CHOICE Act.  It would gut these safeguards by repealing most of the Dodd-Frank Act.
After voting, U. S. Rep. Billy Long stated that the bill ends “too big to fail” and that “taxpayer bailouts will be a thing of the past.”  The bill would actually do the opposite, letting financial institutions go back to their previous, dangerous activities.  HB 10 would simply eliminate the  “systemically important” identification from non-bank financial institutions and financial market utilities, ending “too big to fail” in name but not in fact.
Banks that meet a 10-percent equity to debt ratio would be exempted by HB10, and it would allow banks of any size to opt out of several crucial regulations.
The bill would eliminate all Consumer Financial Protection Bureau (CFPB) rules designed to ensure against risky mortgage loans, and remove CFPB jurisdictions over payday and title loans, both disastrous for low-income borrowers.
HB 10 would remove limits on the Wall Street bonuses that encouraged traders to take risks that contributed to the economic crash.
The Dodd-Frank Act established new limits that ended these pay practices and instead tied their bankers and traders salaries to long-term success.  The CHOICE Act would entirely repeal this.
Many families and communities still suffer from the effects of the 2008 financial crisis.  The Dodd-Frank Act guards against another similar incident. If the Financial CHOICE Act passes the Senate and becomes law, we may see history repeating itself.
 
Vera Nall writes a column for the Neosho Daily News.