Thomas Massies explanation of his NO vote on 922. He seems to be focused more on the longer-term consequences which I appreciate. It was a tough vote. On one hand, you have Dodd-Frank, which is increased regulation of the banking industry. The free market school of thought is that regulation is bad. So at first blush, it would seem that a bill like HR 992, which seeks to diminish regulation, would be a free market bill and therefore a good bill. But heres the rub. Because deposits are FDIC insured, consumers have no incentive to shop for a safe bank. (Ill shop for the best interest rate if I know I can never lose my deposit, which often means Im shopping for the riskiest bank). Dodd-Frank prohibited banks that have FDIC insured accounts from engaging in the swaps market. (participation in the swaps market was identified as risky behavior that led to the perceived impending bank collapse before the bail out) HR 992 allows FDIC insured banks to re-engage in the swaps market. My legislative assistant and I decided that HR 992 increases the scope and volume of bank activity that tax payers will one day be forced to bail out again. The real answer is neither Dodd-Frank nor HR 992. The real answer is to reform the FDIC insurance program and to NEVER bail out the banks, which would encourage customers (and bank shareholders) to seek safe banks. Banks would not be competing to be the riskiest banks on the market. And in this case, the free market system would work to restore safer banking.
Posted on: Fri, 08 Nov 2013 13:43:46 +0000
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