Rep. Scott Garrett, R-N.J., stands at the forefront of the Republicans' efforts to put their stamp on the implementation of the sweeping Dodd-Frank financial reform law.
He serves as the new chairman of the House Financial Services Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, which is responsible for overseeing the Securities and Exchange Commission and weighing in on issues related to investment advice.
In a recent interview, Mr. Garrett discussed how financial reform will evolve in the new Congress.
Q. What is the biggest change that we will see in the House Financial Services Committee under Republican leadership?
A. We will try to take a more thoughtful approach to looking at financial services regulatory reform and the other major topic we have — [government-sponsored-enterprises] reform. We need to take a moment to look at the subject matter from the proverbial 30,000-foot range: the economic posture we find ourselves in, and the consequences of what's already occurred in financial regulation, which we really did not do at all over the last years.
Q. How would you like to change Dodd-Frank?
A. I'm not about to say, as I would with health care reform, “Let's just throw the whole thing out.” There are some elements that need to be looked at.
Certainly, over the last months, we have already seen the negative impact of [Dodd-Frank] on a number of different areas — whether you're talking about the securitization aspect or the derivatives end-user aspect. The studies that are being done with regard to financial advice — those areas need to be given a lot more thoughtfulness.
Q. What are the criticisms of Dodd-Frank that you are hearing?
A. One of the biggest push-backs we're getting from the folks coming in here is, not only did the two-year process go too quickly, now the regulations are coming out too quickly. Industry is not able to keep up with this, and they are already projecting the problems that will come about because of it.
Q. Now that Dodd-Frank is law, what can you do to slow it down?
A. Through oversight, we can convey to regulators: “You don't want to meet the deadline for the deadline's sake just because it's in the statute. You want to make sure the regulations actually improve the capital markets. You want certainty with regulations that will actually be good [so] you don't have to go back and reform again.”
Q. Do you support a universal fiduciary standard for retail investment advice?
A. A good thing about this bill is that a number of studies were called for. This is not a quick-solution area. There are legitimate arguments being made on both sides of the issue. On one side, you have uniformity of regulation so the little guys know they're adequately protected. The other side of the equation, using the little investor again as the example, is making sure they're not squeezed out of the market. I'd like to see what the study has to say as far as what will be the impact of a single standard.
Q. Do you favor a self-regulatory organization for registered investment advisers?
A. I do see [SROs] as positive forces ... having worked effectively in other areas. They hold merit.
Q. Will the SEC get the funding required to hire the 800 new staff members it needs to implement Dodd-Frank?
A. I can't give you a definite answer on that. I was one that was reticent about the increase in funding for the SEC that we saw come through [Dodd Frank]. Give credit where credit is due that [SEC Chairman Mary] Schapiro's taking a tough situation and dealing with it. Whether or not all the efficiencies and all the changes in structure are being done there to make sure that they're appropriately applying the personnel they have where they need to be is something we'll be continuing to take a look at.
Q. What is your assessment of Mary Schapiro's tenure so far?
A. I think she's trying to be very responsive to Congress. I appreciate her candor in the difficult role that she inherited. I look forward to mutually working on these issues.
E-mail Mark Schoeff Jr. at mschoeff@investmentnews.com.
