Witnesses warn against unintended consequences of Dodd-Frank during House hearing

Thomas Lemke

Witnesses from CalPERS, the Investment Company Institute and CRE Finance Council testified during a House hearing on the 2010 Dodd-Frank Act this week that the legislation could hinder rather than boost the U.S. financial system.

The testimony began with assurances from witnesses that Dodd-Frank was welcomed following the 2008 financial collapse. The witnesses then, however, warned House members against possible unintended consequences of the legislation.

Thomas Lemke, the EVP of Legg Mason & Co., speaking on behalf of the ICI, said that a more resilient financial system would be beneficial.

“But building this more resilient system is challenging and complex, and care must be taken to avoid unintended negative consequences,” Lemke said, according to “That is why ICI, like other market participants, believes that how these Dodd-Frank provisions are implemented is of utmost significance.”

CREFC President Paul T. Vanderslice said that the financial reforms could damage commercial real estate funding.

“We’re concerned that each individual regulation may be going beyond Congressional intent and, when these regulations are aggregated, the combined effect will curtail credit further than you intended,” Vanderslice said, reports.

Vanderslice added that Premium Capture Cash Reserve Accounts intended to bolster risk-retention could increase borrowing costs and make it difficult to obtain credit.

“Investors also would be affected, as they will not have sufficient CMBS product to provide the risk diversification and yield intended to meet, for example, life insurance and pension benefit payment obligations,” Vanderslice said, according to

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