For Capito, Jobs Are Dodd-Frank Litmus Test
Kaper, Stacy, American Banker
Byline: Stacy Kaper
WASHINGTON - Rep. Shelley Moore Capito has had more than a few questions about the Dodd-Frank Act and other reforms, and now she has the power to address them.
As the new chairman of the House financial institutions subcommittee, the West Virginia Republican said she plans to examine three specific concerns: the Federal Deposit Insurance Corp.'s authority to unwind systemically vital institutions; the consumer protection bureau; and clashing messages to community banks to tighten lending standards but at the same time make more loans to small businesses.
"We certainly want to see ... how these regulations are impacting jobs at financial institutions," Capito said in a recent interview. "If we enact all these reforms, is that going to be four more banking jobs but we are not going to lend as much? Or we are not going to be able to extend as much credit, shrinking another 150 jobs? So those kinds of things I think we really want to keep our eye on."
That said, Capito has embraced the spirit of comity that at least momentarily occupies Capitol Hill. She largely avoided offering hard conclusions on contentious issues, saying to do so would be "premature" without digging into the details. Capito has joined forces with Rep. Emanuel Cleaver, D-Mo., in a quest to rebuild the Civility Caucus, a bipartisan group focused on fostering a culture of mutual respect and courtesy among lawmakers.
When it comes to jobs and big-government worries, though, she is following her party's playbook. Capito - who has been on the House Financial Services Committee eight years - said she plans to focus her agenda through the prism of how Dodd-Frank implementation would affect jobs every step of the way.
A nagging issue for Capito is whether the FDIC and the Treasury Department have too much discretion to treat similarly situated creditors differently when resolving a systemically significant institution. She said she has lingering concerns that the government might have too much power to assist "too big to fail" firms.
The FDIC recently issued a rule saying it would provide such extra coverage for creditors in extremely limited cases - for essential services like building maintenance that the FDIC would need to run a receivership, or creditors that would help maximize the agency's recoveries. Still, Capito said the resolution authority needs closer review.
"The 'too big to fail' issue, I'm not sure that's laid to rest in Dodd-Frank," she said. "We fought vigorously for bankruptcy as a resolution rather than the resolution authority that was finally passed. And that was one of the areas that I really became more involved in, so I'd like to watch and see how the resolution authority is being developed. And again, does it give the implicit backstop of the federal government? ... If a firm begins to fail, what kinds of safeguards do we have in there to make sure we are not bailing someone else out? I'm not certain that we have all those questions answered."
Capito had joined fellow Republicans during the Dodd-Frank debate in pressing for a bankruptcy alternative to resolution authority. But in the interview she said she's unsure how her concerns should be settled.
"I have seen comments sort of all over the board on this," she said. "We need to look at it in more depth."
Though she acknowledges reforming the government-sponsored enterprises, Fannie Mae and Freddie Mac, will be mostly an issue for the capital markets subcommittee, she said her subcommittee should assess the impact of reform proposals on financial institutions. Her goal, like most Republicans, is to prevent a taxpayer bailout.
"The philosophies there are ranging from totally dismantling and throwing them out the door to reworking or piecemeal dismantling. So it sort of remains to be seen ... no more implicit guarantees of the backstop of the federal government both at Fannie and Freddie and at some of the larger financial institutions. …