Republican presidential candidate Jon Huntsman released this financial reform plan on November 28, 2011.
FINANCIAL REGULATORY REFORM
As president, Governor Huntsman will make financial regulatory reform a high priority. Real financial reform will mean breaking the Faustian bargain between Wall Street and Washington that helped fuel the housing bubble, drove a series of bailouts, and prevented meaningful reform in the aftermath of the financial crisis.
More specifically, real reform means repealing the 2010 Dodd-Frank law, which perpetuates too-big-to-fail and imposes costly and mostly useless regulations on innocent smaller banks without addressing the root causes of the crisis or anticipating future crises. But the overregulation cannot be addressed without ending the bailout subsidies, so that is where reform must begin.
The world's financial system is going through a major shake-up – with large parts of it falling into state hands, for example in Europe. To remain competitive, America must think differently. We need to start thinking prospectively about an evolving and complex financial system. But this cannot mean that the government allocates credit. We need the market to allocate credit, without the kinds of subsidies that encourage a build-up in dangerous amounts of borrowing and leverage anywhere in the economy.
End Too-Big-To-Fail: To protect taxpayers from future bailouts and stabilize America's economic foundation, Jon Huntsman will end too-big-to-fail. Today we can already begin to see the outlines of the next financial crisis and bailouts. More than three years after the crisis and the accompanying bailouts, the six largest U.S. financial institutions are significantly bigger than they were before the crisis, having been encouraged by regulators to snap up Bear Stearns and other competitors at bargain prices.
Maximize Derivatives Transparency: An opaque derivatives market was one reason for the systemic impact of the subprime mortgage crisis. Greater transparency will permit greater oversight by both market participants and regulators, and will also allow end-users to negotiate better terms with Wall Street and in turn lower trading costs.
Repeal Dodd-Frank: Governor Huntsman believes that Dodd-Frank was an inappropriate regulatory response to the Panic of 2008. The legislation, signed into law by President Obama in summer 2010, ignored the government's pervasive role in causing the crisis, assures future transfers from taxpayers to bankers by institutionalizing a government backstop for too-big-to-fail firms, and imposes massive new regulations and unreasonable compliance costs on smaller financial firms.
End Wall Street's Reliance On Excessive Short-Term Leverage: The mismatch in maturities was at the core of much of the Panic of 2008, and it cannot be sustained. As president, Jon Huntsman will also implement tax reform that includes eliminating the deduction for interest payments that gives a preference to debt over equity, thus ending subsidies for excess leverage.
Fix Basel: Governor Huntsman believes that risk needs to be acknowledged and managed properly. The Basel III Accord primes the pump for the next financial crisis by putting its thumb on the scale of sovereign debt, making it less expensive for banks to invest in those instruments without making a realistic risk assessment.
Ensure a Stable Dollar Policy: Jon Huntsman supports a strong and stable dollar. As president, he will appoint Federal Reserve Board Governors and a Chairman who believe in sound money. The United States cannot devalue our way to prosperity and efforts to do so risk a "beggar thy neighbor" round of devaluations, which will ultimately harm American exporters and risk the dollar's privileged position as the primary global reserve currency.
Shut Down Fannie Mae and Freddie Mac: As president, Jon Huntsman will dismantle Fannie Mae and Freddie Mac. Eliminating the GSEs should not be controversial. At its heart, the Panic of 2008 was a crisis born of crony capitalism. It is unconscionable that five years after the start of the housing crisis, these companies have not seen a serious reform proposal and most of their executives are still in power.
Restore the Rule Of Law: President Huntsman's administration will direct the Department of Justice to take the lead in investigating and brokering an agreement to resolve the widespread legal abuses such as the robo-signing scandal that unfolded in the aftermath of the housing bubble.
European Sovereign Debt Crisis: The recent failure of MF Global illustrates the danger that the unfolding sovereign debt crisis poses for domestic financial markets. The world works better when the United States leads and as president, Jon Huntsman will be supportive of a European-led global response to the ongoing crisis; the pell-mell response to date has created additional uncertainty, worsening the crisis.