The First Amendment is exactly 45 words. Yet it has effectively put a chokehold on such damaging institutions as prior restraint and allowed satirists as vile as Larry Flynt the right to print a fictitious advertisement accusing a minister of incestuous relations with his mother in an outhouse. In economic terms, this is a pretty good return on investment for the American people. Forty-five words written more than 200 years ago was enough to protect us from a wide-range of abuses by the United States federal government, which has become arguably the most influential organization in world. Dodd-Frank, on the other hand, illustrates such a diminished return on investment per word, no reasonable business would undertake such an investment.
As today's Congress fails to keep it short and sweet, members of the general public have increasingly become unhappy. Over the last two years, the Tea Party has grown from a few protests, exercising the First Amendment, to a substantial political presence with a small but substantial impact on the 2010 midterm election. While the loosely organized party, with its roughly defined ideals has been criticized for some of their more conservative beliefs, the party has some valid point, which should be applied to financial reform. In the party’s “Contract to America,” (here), Tea Party members state, “Our…economic liberties are inherent, not granted by our government. It is essential to the practice of these liberties that we be…free from excessive control over our economic choices.” This is a given, yet Dodd-Frank created at least three new agencies, the Financial Stability Oversight Council, the Office of Financial Research, and the Bureau of Consumer Financial Protection to oversee these economic choices. The irony is Title III of the act eliminates the Office of Thrift Supervision in order to “to streamline and rationalize the supervision of depository institutions and the holding companies of depository institutions,”(Sec. 301(4)). The Act itself is enormous and requires several hundred more regulations to be written, allows for the restriction of fees certain institutions may charge and in part funds itself by charging such institutions for conducting certain investigations.
Yet, “The Contract to America” proposes a different strategy, albeit it references not the disaster that is financial reform but the beast that is the federal tax system. “Adopt a simple and fair single-rate tax system by scrapping the internal revenue code and replacing it with on that is no longer than 4,543 words-the length of the original Constitution,”(The Contract to America”) Why not scrap Dodd-Frank? Forget 2,300 pages. It calls for increased transparency for massive financial companies, yet it is nearly inaccessible to the average person who doesn’t have the resources to sift through that mess. Establishing three new agencies, not to mention the hundreds of reports the act requires and the expensive litigation that will follow is burdensome to taxpayers, businesses and the consumers of financial products. TCF Bank has already sued the Federal Reserve over the amendment on debit interchange fees, though restrictions on such fees have yet to be determined.
In the midst of the most massive financial meltdown since the Great Depression, Congress needs to do better. The global financial system is undoubtedly infinitely complex and interlinked. But it is based on simple principles. Supply, demand, profit. Financial institutions don’t go into business to fail; they go into make money. Let that incentive drive them, with minimal intervention. Make such laws accessible and force consumers to stand on their own in financial decisions, so they have the incentive to make stable, smart investments, without looking to the government to bail them out. Because for all of that 2,300 pages, consumers are left with the impression of recourse, yet does Dodd-Frank really protect us from our choices? Or does it merely provided a roadmap to financial institutions to keep taking risks, while giving government agencies the power to help them unwind from their messes?
If the First Amendment can accomplish so much with just 45 words, 4,500 words can go a long way in providing a clear, fair and accessible path to financial stability, which even in a free market is the ultimate goal.
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