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Senator Toomey clarifies position on Dodd-Frank

Pat Toomey

U.S. Senator Pat Toomey (R-Pa.), in a letter to The Washington Post editor, responded to suggestions that he did not support the regulation of financial institutions through the 2010 Dodd-Frank Act.

In Dana Milbank’s May 23 column, Milbank quoted Toomey as saying “we’ve gone down the wrong road” with Dodd-Frank, adding that Toomey said less invasive legislation would allow “people in the marketplace [to] make the decisions they will make,” The Washington Post reports.

“Sounds nice,” Milbank wrote, according to The Washington Post. “But that’s what gave us 2008.”

Toomey, however, said that while he does support the regulation of financial institutions, Dodd-Frank has had unintended consequences.

“During the hearing, I stated that we have gone down the wrong road with the Dodd-Frank law, not because I reject regulating financial institutions, as Mr. Milbank suggested, but because Dodd-Frank empowers government regulators to micromanage financial institutions with impractical, incomprehensible rules that continue to leave taxpayers on the hook for ‘too big to fail’ banks,” Toomey wrote, The Washington Post reports.

Toomey said that higher capital requirements directly related to an institution’s size should replace Dodd-Frank.

“Significantly enhanced capital requirements will naturally diminish leverage and reduce the incentive to grow, thereby reducing overall size and systemic risk,” Toomey said, according to The Washington Post. “Instead of keeping taxpayers susceptible to risk-prone banks, as Dodd-Frank effectively does, my proposal would make bankers bear the risk they undertake, which is ultimately the best way to limit risk in the financial world.”

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