Nov 16, 2020 - 11:00am

Growth Engine

CCMC's Roadmap for Revitalizing Financial Markets

 

 

Introduction

In 2016, The Center for Capital Markets Competitiveness (CCMC) at the U.S. Chamber of Commerce published Restarting the Growth Engine: A Plan to Reform America’s Capital Markets—the 2016 Growth Engine Report. The 2016 Growth Engine Report contained a bold list of policy recommendations as a roadmap for revitalizing financial markets so job creators could access the financing they needed to start new businesses, make capital investments, and hire employees.

The 2016 Growth Engine Report recognized that ideological fights over the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) were a vestige of the past. Instead, it was important for policymakers to focus on smarter regulation that could harness the inherent strength of U.S. financial markets without undermining stability. Recommendations included structural reforms to the rulemaking process so that we develop smart regulation that stands the test of time and provide certainty to the markets, as well as targeted policy proposals for improving financial regulation to unleash the full potential of our capital markets.

Many of the policy recommendations made by CCMC in 2016 have been implemented, and the work is underway on many others. Congress passed major legislation in 2018 that required banking regulators to ensure that regulations imposed on regional banks after the 2008 financial crisis are appropriate for their size; the legislation also included other commonsense measures with broad bipartisan support such as improving access to credit for consumers and small businesses as well as reducing regulation for community banks and credit unions. Financial regulators have also been busy implementing pro-growth reforms not required by Congress, such as making it easier for companies to go public and making it easier for consumers to access credit. Unemployment had reached record lows and wealth creation was on the rise until the economic repercussions of the COVID-19 pandemic gripped our country in 2020.

Now it is important that the financial sector fuel an economic recovery that is felt throughout the nation and benefits all Americans.

No one could have envisioned the havoc imposed on the domestic and global economy as a result of the COVID-19 pandemic. The financial services sector has been a source of strength, assisting the government in stabilizing the economy through the shutdown and its aftermath. Currently, we are in an uneven recovery—some industries are doing well, others are in severe downturn. Now it is important that the financial sector fuel an economic recovery that is felt throughout the nation and benefits all Americans.

The COVID-19 downturn was historically dramatic and widespread. The recovery must be equally dramatic and widespread to provide an equality of opportunity for all Americans.

It is important that the Executive Branch and Congress work together, regardless of party, to shape policies needed to spur and sustain such a broad-based recovery. Issues left untended for years, such as structural regulatory reform, should be tackled expeditiously. New issues that can provide a generational leap, such as digital assets, need to be addressed with dispatch and speed. While the U.S. has the deepest and most developed capital markets in the world, as the 2016 Growth Engine Report predicted, U.S. markets face unprecedented international competition challenges. The private sector will rise to meet these challenges. However, policymakers in the U.S. can no longer ignore problems that place American capital markets at a competitive disadvantage in a global economy.

It is important for policymakers to keep in mind that the economic crisis was not caused by a market or regulatory failure and did not originate as part of the normal business cycle. Weakness in the financial system was not the cause of the downturn as was the case in 2008—in fact, financial companies have proved resilient and have been at the forefront of the economic recovery. Countless businesses and workers have been harmed through no fault of their own and in many cases were mandated by a government order to shut down or limit their operations. The federal government’s response to the crisis through fiscal and monetary policy, although imperfect, has been crucial to temporarily supporting our economy.

The government response to the pandemic is unprecedented in its scope and scale. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent legislation authorized over $650 billion for the Paycheck Protection Program that has been an indispensable lifeline for businesses and their employees, while the Federal Reserve has committed to providing upward of $3 trillion in credit through a number of emergency lending facilities. These actions have stabilized markets, helped businesses stay afloat, and allowed millions of Americans to continue to earn a paycheck, but they cannot remain a permanent feature of our financial markets.

The following recommendations are intended to revitalize our capital markets and jumpstart our economy for all Americans.

Businesses are ready to innovate, and Americans are ready to get back to work—policymakers can make this easier by adopting the proposals outlined in this report.

 

Top Recommendations

Enact Policies Expanding Access to Capital to Jumpstart the Economy and Close the Racial Wealth Gap

 

Implement Corporate Governance Reforms to Improve Investor Protections and Grow Companies from Small to Large

 

Review and Update Liquidity and Capital Requirements for Banks

 

Reform Supervision of Banks so It is Tailored for Individual Institutions and Improves Communication with Regulators

 

Increase Oversight over the Financial Stability Board and other International Standard-Setting Bodies

 

Transform the Consumer Experience by Expanding Access to Digital Channels for Financial Services
 
Expand Consumer Choice and Access to Credit

 

Enact Legislation that Makes Structural Reforms to Financial Regulators and the Rulemaking Process