HOUSE FINANCIAL SERVICES COMMITTEE
HEARING ON FIFTEEN YEARS OF DODD-FRANK
For questions on the note below, please contact the Delta Strategy Group team.
On July 15, the House Financial Services Committee (HFSC) held a hearing entitled “Dodd-Frank Turns 15: Lessons Learned and the Road Ahead.” Legislation noticed for the hearing is available here. Witnesses in the hearing were:
- Ken Bentsen, President and Chief Executive Officer, Securities Industry and Financial Markets Association
- Lindsey Johnson, President and Chief Executive Officer, Consumer Bankers Association
- Tom Quaadman, Chief of Government Affairs and Public Policy, Investment Company Institute
- Dr. Paul Kupiec, Senior Fellow, American Enterprise Institute
- Dennis Kelleher, Co-founder, President, and Chief Executive Officer, Better Markets
Attached is a high-level summary of the hearing prepared by Delta Strategy Group, which includes several high-level takeaways from opening statements and discussion.
KEY TAKEAWAYS
- Chairman Hill (R-AR) cited how the enactment of Dodd-Frank created one-size-fits-all mandates, shifted activity outside the banking system, created new and unaccountable agencies with unprecedented autonomy, and prioritized duplicative compliance and regulation by enforcement over consumer protection. He called for Congress and regulatory entities to craft thoughtful, bipartisan reforms that restore balance, foster growth, and protect consumers in response to how the regulatory framework has only increased in complexity and created regulatory gaps, while still imposing subsequent compliance costs and substantial burdens on institutions.
- Chairman Hill cited how institutions have been forced to navigate new compliance burdens and divert resources due to the SEC’s regulatory overreach, costly disclosure mandates, and mission creep. He cited how it burdened U.S. public companies with excessive red tape while giving foreign competitors a leg up, citing foreign private issuers’ exemptions from the most burdensome Dodd-Frank disclosure requirements, alongside how the complexity and costs imposed by Dodd-Frank have helped fuel the long-term decline in U.S. IPOs and stifled capital investments.
- Representative Huizenga (R-MI) contrasted the One Big Beautiful Bill (OBBB) and the Dodd-Frank Act, highlighting how the OBBB will expand economic opportunity, reduce regulatory burdens, and make lasting reforms to the financial system as he criticized Dodd-Frank for empowering federal agencies like the SEC and CFPB with unchecked authority. He emphasized how Republicans and President Trump aim to curtail regulatory overreach, end enforcement-driven policymaking, and restore innovation and consumer choice in financial services.
- In response to questioning from Representative Lucas (R-OK) on Vice Chairman Bowman’s approach to the fundamental review of the trading book in a Basel reproposal, Bentsen emphasized the need to evaluate the interaction of overlapping rules, particularly how the stress test regime contributes to a double count of capital requirements. He noted that even if the Fed adopted all of SIFMA’s suggestions, risk-weighted capital requirements would still rise significantly due to these overlaps. He also cited inconsistencies with the Basel framework as implemented in Europe and the UK, and the Fed staff’s initial “gold-plating” of the proposal that would raise capital requirements above already historic levels.
- Representative Casten (D-IL) referenced Dodd-Frank’s effort to establish joint SEC-CFTC jurisdiction over products that had moved into less disclosure-intensive markets, such as security-linked derivatives. He asked whether a company that custodied its own stock and issued a token tracking that stock, without granting ownership or redemption rights, would constitute a derivative under current law. Bentsen responded that it would be a derivative, stating that it goes beyond Dodd-Frank and back to the Commodity Futures Modernization Act.
- Representative Casten noted that SEC Commissioner Hester Peirce recently stated that tokenized shares that do not offer ownership in the underlying asset constitute security-based swaps and should not be traded at retail. He emphasized the significance of this interpretation in the House’s consideration of the CLARITY Act, highlighting that Section 202 would allow issuers to tokenize a security and, if raising $50 million or less, potentially avoid SEC jurisdiction. Kelleher agreed with Representative Casten that such carveouts and ambiguities that evade the most fundamental elements of securities laws open loopholes that can endanger the status of capital markets and erode consumer protections.
- Bentsen stated that it is critical for policymakers to tailor regulatory policies to ensure transparency, investment protection, and mitigate legitimate market risk within the current regulatory dysfunction without unnecessarily disrupting or constraining critical markets. He cited how some regulators have interpreted provisions of the Dodd-Frank Act as a license to establish new rules outside the original intent of the statute. He emphasized Congress’s role in and responsibility to periodically review previously enacted subsequent statutes from Dodd-Frank to determine effectiveness, adherence to legislative intent, and market impact.
- Johnson agreed with Bentsen on the importance of Congress continually reviewing statutes to ensure they fulfill their intended purpose, avoid unintended consequences such as increased costs for businesses or consumers, and reflect evolving market conditions. He emphasized the importance of prioritizing fact-based policies over the political agendas of the administration in office.
- Bentsen discussed that while many Dodd-Frank reforms have made the U.S. financial system more resilient, appropriately tailored regulation should balance enhancing financial stability and investment protection with supporting the flow of investment capital to end users. He argued that the financial sector can remain well-regulated, well-capitalized, and resilient even with recalibration, and how unnecessarily burdensome regulations limit banking organizations’ ability to unlock capital and liquidity. He stated that SIFMA believes it is appropriate to evaluate whether certain components of the regulatory framework developed under Dodd-Frank are excessively conservative and impose costs that outweigh benefits.
- Bentsen expressed SIFMA’s concerns that the 2023 Basel III Endgame proposal would significantly raise already robust U.S. bank capital levels and disproportionately target capital markets activities, with negative impacts exacerbated by overlap with the Federal Reserve’s stress testing regime. He cited over $50 billion in annual compliance costs as contributing factors to consolidation and a thirty percent decline in registered broker-dealers since Dodd-Frank’s enactment.
- Quaadman raised how the Dodd-Frank Act failed to address foundational issues, referring to blind spots and a lack of regulatory coordination, instead adding layers to a “rickety foundation,” in attempting to eliminate risk rather than acknowledging it can only be transferred. He noted that while Dodd-Frank achieved improvements in derivatives transparency and created FSOC to better coordinate regulators, the Act delegated too much authority to agencies, leading some to expand their powers in response to statutory ambiguity. He criticized FSOC’s efforts to designate non-bank institutions for systemic risk regulation, calling it a mismatch that applied bank-like rules to non-bank business models. He outlined his support for the FSOC Improvement Act, which would apply an activities-based approach to systemic risk and address the failures of well-intentioned disclosures.
- Kelleher warned against current policymakers and regulators repeating the past mistakes resulting from listening to the financial industry’s “siren song” of deregulation, cautioning that the misleading deregulation narrative is being repeated. He raised heightened and increasing risks of institutions that are too big to fail, manage, jail, or regulate in reference to 2023 bailouts, necessitated due to the consequences of prior deregulation and weakened resilience of large institutions.
- Democrats, led by Ranking Member Waters (D-CA), criticized efforts to further deregulate and cautioned about the ethical and national security concerns raised by the President’s financial interests in World Liberty Financial, alongside risks of banks holding crypto assets without necessary statutory oversight. She called for members of Congress to vote against passage of the CLARITY and GENIUS Acts, while highlighting her sponsorship of the Stop TRUMP in Crypto Act of 2025. Representatives Sherman (D-CA) and Lynch (D-MA) questioned Bentsen on the risks associated with vertical integration in the crypto ecosystem, outlining the risks of allowing such an integrated structure within crypto and warning of future industry bailouts.