Testimony: Haphazard implementation has allowed unintended consequences
CHICAGO, IL–(Marketwired – Jul 25, 2014) – Anthony Carfang, Partner, Treasury Strategies, Inc. testified Wednesday at the U.S. House of Representatives on “Assessing the Impact of the Dodd-Frank Act Four Years Later.” Treasury Strategies supports the House’s Committee on Financial Services efforts to ensure the Dodd-Frank Act and all other financial regulation is implemented in a manner that supports a stable and robust financial system.
Carfang, citing experiences of Treasury Strategies’ corporate clients, raised serious concerns regarding the potential unintended consequences for businesses and financial institutions that Dodd-Frank’s haphazard implementation is causing:
- Impaired market liquidity and reduced access to credit
- Higher costs and less certainty for buyers
- Restricted services for proper and allowable businesses
- Competitive disadvantage for U.S. businesses and financial institutions
- Increased compliance costs for American businesses outside the financial services sector
- Higher bank fees for consumers and businesses
- Less access to capital for small business and start-ups
- Shifting of risk to other, less well-regulated sectors of the economy
- Capital flows into offshore markets
While it appears regulators have tried to address some of these concerns, they may have missed the mark, with real-life harmful consequences. American businesses will be compelled to reserve more idle cash and tap more volatile and expensive forms of credit, resulting in more expensive products, fewer jobs, and slower growth.
According to Carfang, “These concerns are very serious and very real. Dodd-Frank’s impact is just beginning to resonate throughout our economy.” Unfortunately, because of the climate of uncertainty created by the poor rollout of Dodd-Frank, “capital efficiency in the U.S. has declined, as evidenced by increased corporate cash buffers. The sad trend line is that corporate cash has swelled from 9% of U.S. GDP to nearly 12% of GDP, idling hundreds of billions in cash. Companies are keeping more precautionary cash to deal with the regulatory uncertainty.”
“As the banking sector becomes less able to provide American businesses with both liquidity and access to credit, American businesses will be compelled to reserve still more idle cash, and tap more volatile and expensive forms of credit. These costs will ultimately be borne by ordinary Americans in the form of more expensive products, fewer jobs and decreased dividends.”
Carfang strongly encourages Congress to put this regulation back on the right track. That means, at a minimum:
- Dissolving the FSOC and eliminating the double jeopardy for America’s businesses and financial institutions
- Eliminating the ambiguity, inconsistency and vague terminology in the rules
- Instituting protection for the businesses and financial institutions that had nothing to do with causing the crisis
To receive a copy of Carfang’s full testimony, please send an email to Testimony@TreasuryStrategies.com.
About Treasury Strategies, Inc.
Treasury Strategies, Inc. is the leading Treasury consulting firm working with corporations and financial services providers. Our experience and thought leadership in treasury management, working capital management, liquidity and payments, combined with our comprehensive view of the market, rewards you with a unique perspective, unparalleled insights and actionable solutions. Visit TreasuryStrategies.com for more information.