Financial Services leaders kick off new Congress with spat over 'too big to fail'

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On Tuesday, Hensarling released a statement announcing subcommittee assignments that included a jab at Dodd-Frank. In particular, he said the sweeping law "enshrined a 'too big to fail' bailout scheme into law."

Republicans have long criticized a provision of the law that identifies large and influential financial entities as vital to the financial system, which they contend gives them the label of "too big to fail" and the implicit government backing that comes with it.

But Waters was eager to take up the mantle of chief Dodd-Frank defender, contending that the law may identify such firms, but also includes a set of tools to wind them down if they begin to collapse, firing executives and wiping out shareholders in the process.

"The point of this process is to allow institutions to fail without causing catastrophic damage to the larger economy, other companies, small businesses, American taxpayers and American families," she said.

Democrats, including Treasury Secretary Timothy Geithner, have been adamant that the law ends "too big to fail," but skeptics on both the left and the right remain unconvinced as the nation's largest banks have only gotten larger since the financial crisis.

For example, Richard Fisher, president of the Federal Reserve Bank of Dallas and one of the Fed's more conservative members, has been a vocal advocate for breaking up the nation's largest banks. And lawmakers on both sides of the aisle, such as Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.), have found rare common ground on the same issue.

The exchange of statements marks the beginning of one of the more intriguing partnerships of the 113th Congress, as one of the House's most conservative members faces off against one of its most liberal. Both are in new positions atop the committee. Waters replaced Rep. Barney Frank (D-Mass.) who retired at the close of the 112th Congress, while Hensarling takes the seat of Rep. Spencer Bachus (R-Ala.), who reached his term limit as the top Republican there.

Despite the ideological opposition, Waters remained hopeful the two could work together.

"I appreciate the bipartisan nature of today’s Financial Services Committee markup ... I am hopeful that it will set the tone of our future work together," she said.