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First SOX, now a rollback of Dodd-Frank compliance regulations?

President Barack Obama recently signed the JOBS Act into law, cutting back Sarbanes-Oxley requirements for emerging companies. Next up? Dodd-Frank compliance regulations.

The House Financial Services Committee yesterday advanced legislation that reduces $35 billion from the deficit, while also cutting key portions of Dodd-Frank regulations. The Committee voted to eliminate the “Orderly Liquidation Authority” created under Dodd-Frank, and pointed to Congressional Budget Office reports stating its elimination creates $22 billion in savings over the next 10 years. The authority is designed to allow regulators to take control of large, failing organizations and wind them down in such a way that it does not create havoc on the economy.

Republicans argued this puts taxpayers at risk.

“Dodd-Frank, signed into law in July 2010, permanently established a bailout regime in which the federal government will expend considerable sums upfront to bailout creditors of failed firms,” according to a Financial Services Committee release.

The committee also approved an amendment that repeals the Office of Financial Research (OFR), created under Dodd-Frank to gather information on the financial system. Detractors were critical of the OFR’s ability to collect non-public information, and added that it “lacks accountability and transparency.”

Prior to the Financial Services Committee vote, Treasury Secretary Timothy Geithner warned lawmakers that reducing Dodd-Frank regulations under the committee’s proposals would “would critically undermine the government’s ability to limit the damage to the economy in the event of future financial crises.”

Geithner was also critical of the “number of proposals” pending before the House of Representatives that would amend portions of Dodd-Frank regulations that reform the derivatives market.

“If enacted, the proposed legislative changes would undermine the integrity of the rulemaking process, further complicate the work of the regulators, and increase uncertainty for firms,” Geithner wrote in the April 18 letter to House Financial Services Committee Chairman Spencer Bachus and Ranking Member Barney Frank.

The measure now goes to the full House, where it will no doubt continue to be argued along party lines. But the question is, with the economy finally showing signs of recovery (albeit slowly), is rolling back SOX and Dodd-Frank compliance regulations sending the right message? These regulations were put in place to prevent another economic crisis, and now we want to cut them back before we are even fully out of the woods?

The current crisis began only a few years ago — it’s hard to believe the fraud and lack of oversight is already forgotten. Legislators need to be careful about rolling back compliance, before they are left wondering why we are in another crisis due to unsavory practices created by a lack of rules.

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