Senate Banking Chair on Dodd Frank

Senate Banking Chair on Dodd Frank

As the successor to Sen. Christopher Dodd as chairman of the Senate Banking, Housing and Urban Affairs Committee less than one…


As the successor to Sen. Christopher Dodd as chairman of the Senate Banking, Housing and Urban Affairs Committee less than one year after passage of the monumental Dodd-Frank Act, South Dakota Senator Tim Johnson has his work cut out for him. While House Republicans move to scale back the legislation’s widespread changes, Johnson makes clear he believes the law is necessary and should go forward as planned. At the same time, however, he offers a bipartisan hand to promote consensus building and economic growth. In addition to his role as Senate Banking Committee chairman, Johnson serves on the Appropriations Committee, the Energy and Natural Resources Committee and the Indian Affairs Committee. The Senator recently responded to questions submitted by Jeff Cunningham on his efforts to improve the economy, protect Dodd-Frank and reform the U.S. housing finance structure.

Jeff Cunningham: What did the 2010 elections mean from a political perspective?

Tim Johnson: The 2010 election was obviously not the best cycle for Democrats as a whole, but these things swing back and forth. Voters elected a Republican House of Representatives and a Democratic Senate, so neither party has a mandate. I don’t know what 2012 will bring, but I know that the American people expect their elected officials to work together to help get the economy back on track and create jobs instead of playing partisan political games.

What do you make of the House efforts to repeal or change Dodd-Frank?

Despite the fact that Americans lost millions of jobs, millions of homes and trillions of dollars in wealth, Republicans apparently believe we were adequately protected during the financial crisis. Efforts to tear down Dodd-Frank are attempts to go back to the days of too big to fail banks, backroom derivatives deals and risky subprime mortgages. I think the American people want Congress to focus on the future and on creating new jobs, rather than trying to dismantle this historic reform.

You have said: “I hope that in the great tradition of this body we can disagree without being disagreeable.” How?

I have always believed that part of my job as a Senator is to work to build consensus, and with a divided Congress that is more important than ever. Neither party has a monopoly on good ideas. The American public wants us to find common ground that creates jobs, grows the economy and deals with the real challenges we’re faced with.

Why was proxy access a controversial measure even in committee?

As with many parts of the bill, there was a lot of disagreement over proxy access because there were legitimate concerns raised on both sides of the issue. In the end, Congress gave the authority to set proxy access rules to the SEC. The SEC’s proposed rule is currently the subject of litigation, and I am closely monitoring the situation. It’s important that a balance be struck between shareholder rights and board autonomy.

To what extent is Fannie Mae and Freddie Mac a focus for the SBC?

Housing finance reform is a top priority, and I have already held three hearings on the topic. It is a very complex issue, so we need to examine it thoroughly and build bipartisan consensus in order to move forward on legislation.

How do you feel about the Financial Stability Oversight Council and its “too big to fail” law?

Dodd-Frank ended too big to fail and ensured that American taxpayers will never again be forced to throw billions of dollars at Wall Street to save firms that run the risk of bringing down our entire economy. The Financial Stability Oversight Council (FSOC) is an essential component of the law, because the systemic problems we saw in the financial crisis cut across the traditional boundaries between regulators. The FSOC has improved coordination and increased transparency between agencies, and I am confident it will help better protect the stability of our financial system. It’s important that shareholders have a say on executive compensation, and Dodd-Frank ensures that they do. I have no doubt that talented and successful executives who deliver value to shareholders will be appropriately compensated.

We hear that public accounting firms will be a focus of your efforts.

Reliable, accurate and transparent accounting is clearly vital for investor protection and confidence. This is an important issue that the Committee has and will continue to monitor, most recently at a subcommittee hearing in April.

Do you feel the Dodd-Frank ‘say on pay’ provision gives investors adequate safeguards?

The SEC’s final rules regarding shareholder votes on executive compensation are only a few months old at this point. We should give the new rules adequate time to work before jumping to conclusions or introducing new legislation.

What suggestions do you have for setting CEO compensation?

It’s important that shareholders have a say on executive compensation, and Dodd-Frank ensures that they do. I have no doubt that talented and successful executives who deliver value to shareholders will be appropriately compensated.

What concerns you most about funding for the SEC?

It is vitally important that both the SEC and CFTC get the resources they need – the 2008 economic crisis showed us the dangers of regulatory shortfalls. The Wall Street reform bill strengthened regulators ability to police the financial system and help prevent another financial crisis. These two important regulators serve on the front lines investigating fraud and abuse, and it is imperative that they are provided with the necessary resources to do their jobs and protect American taxpayers and investors.

What do you hope your legacy as banking chair will be?

I am focused on doing the best job I can. My top priority for the Committee is to support the nation’s economic recovery and promote job growth, and my agenda as chair reflects that.

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