NU Online News Service, Jan. 7, 3:50 p.m. EST
Rep. Michele Bachmann, R-Minn., plans to introduce legislation repealing the Dodd-Frank financial services law, calling it "misguided" and a "blatant abuse of power."
A key criticism by Rep. Bachmann is a provision in the law that allows the federal government to take over failing non-bank institutions, such as American International Group, according to Rep. Barney Frank, D-Mass., former chairman of the House Financial Services Committee and a prime architect of the legislation.
In a statement, Rep. Frank said another key objection to the legislation by Rep. Bachmann and her conservative supporters is the creation of the independent Consumer Financial Protection Bureau.
The provision empowering Treasury to deal with failing institutions was primarily added because, before Dodd-Frank, the federal government had no authority to oversee failing non-banks.
The Treasury and Federal Reserve Board at one point loaned AIG $191.4 billion in cash, plus provided guarantees for its commercial paper only through the Fed's authority to deal with extraordinary threats to the financial system.
Rep. Bachmann's plans were disclosed in a "Dear Colleague" letter sent Wednesday seeking co-sponsors for her legislation.
She said her bill has the support of the Club for Growth.
In her request for co-sponsors, Rep. Bachmann said, "Dodd-Frank blew down the doors of responsible regulation and grossly expanded the size and scope of the federal government."
She added that, as enacted, Dodd-Frank empowers the Treasury to target and take over bank and non-bank financial institutions that it deems dangerous or at risk.
Further, it grants to the newly created Stability Oversight Council (10 agents from Treasury and Federal Reserve) full power to order Title II seizures and activity-control of any bank for any reason, with a two-thirds vote.
"This is a frightening abuse of power and will do nothing but stymie our recovery," Rep. Bachmann said.
"Dodd-Frank does nothing to address taxpayer-funded liabilities like Fannie Mae and Freddie Mac, and will disproportionately hurt small, community banks," she said.
"It is plain hubris to think that this government, with its $14 trillion debt, annual deficits and wasteful-spending, is worthy of this plenipotentiary oversight," she said.
"Additionally, the unconstitutionality of Dodd-Frank should be obvious to all," she stated.
In his comments, Rep. Frank said the Bachmann effort to repeal the new financial reform law "reveals the hypocrisy of right-wing claims that they are concerned with ending uncertainty in the economy."
"Now that we have put in place a set of rules that allow financial markets to function but which also curb their excesses, Rep. Bachmann and her allies want to reintroduce uncertainty by going back to exactly the situation that led to the financial crisis in the first place."
He added, "It is worth noting that what appears to be their most serious objection--at least as stated here, since abolishing the independent Consumer Financial Protection Bureau remains one of their highest priorities--is that the law grants authority to the Treasury to deal with failing institutions."
He said this provision closely follows a proposal suggested by the Bush administration in 2008, "when its top economic officials noted that the absence of such authority was a major exacerbating factor to the deep recession into which we plunged.
"A number of Bush appointees had a role in shaping the final legislation," he said.