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Tom Donohue: Five Fundamental Goals for a Healthy Financial System

America’s financial system is one of its greatest national assets. For the system to advance our economic recovery, strengthen businesses and continue to help Americans realize their dreams, it must achieve five fundamental goals.

First, it must meet the financial needs of consumers and businesses. Credit enables consumers to buy homes, cars and appliances. Retirement investments enable them to plan for the future. Businesses of every size need capital to invest, expand and innovate. To provide a steady flow of capital, our system must allow a full range of financial products — from credit cards to bonds to bank loans.

Second, our system must be diverse. We need community banks; online banks; credit unions; midsize banks; regional, national and global banks; and nonbank financial institutions. Banks add value and create growth and opportunity in every corner of the country. We also need brokerage firms, investment companies, insurers, reinsurers and all kinds of investors. A diverse financial marketplace is a unique source of strength for the economy.

Third, we need clear and predictable rules. Capital providers must understand what’s expected of them so that they can take appropriate risks. Regulators should clearly define the problem they’re trying to solve and base rules on evidence and data. They must consider how rules overlap and interplay. When they need to change rules, they should do it in an open and transparent manner. And enforcement should be rigorous, fair and consistent.

Fourth, our system should be coordinated at home and abroad. Domestic agencies must cooperate and communicate to avoid contradiction and confusion. International cooperation is critical to competition. We must have systems in place to resolve cross-border issues and prevent regulatory responses that breed protectionism.

Fifth, we must encourage entrepreneurial risk-taking while minimizing risk to the system. Although we cannot eliminate risk, we can identify and manage it. But it’s foolish to base our entire regulatory process on trying to predict and prevent the next crisis. Instead, we should reduce uncertainty, eradicate perverse incentives and prevent unintended consequences that lead to crises in the first place.

Today, the Dodd-Frank Act and other financial reform measures are undermining those goals and failing to meet the needs of consumers, businesses and the economy. The U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness has a plan to bring our system up to snuff. The Fix, Add and Replace (FAR) Agenda fixes what Dodd-Frank got wrong, addresses what it left out and replaces unworkable provisions. To read more about the agenda and other efforts to revitalize our capital markets, visit

— Tom Donohue is president and CEO of the U.S. Chamber of Commerce. The opinions expressed are his own.

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