Money and Banking Provisions in the Financial CHOICE Act: A Major Step in the Right Direction

House Financial Services Committee Chairman Jeb Hensarling (R–TX) has released a discussion draft of a major regulatory reform bill called the Financial CHOICE Act. The core component of this proposed reform is a regulatory off-ramp, a provision that provides regulatory relief to banks that choose to hold higher equity capital. Any serious financial regulation reform should consider this approach because there is little justification for heavily regulating firms that absorb their own financial risks. The Financial CHOICE Act also replaces large parts of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act that increased the risk of future financial crises and bailouts. Overall, the Financial CHOICE Act takes an overwhelmingly positive approach toward reforming financial market regulations. This Heritage Foundation Backgrounder, focusing only on the money and banking sections of the Financial CHOICE Act, highlights the best features of the discussion draft and offers suggestions for improvements.

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