# Two House Hearings Display Foundational Principles Are at Risk 

Many people believe that conservative members of Congress reliably protect private markets from government intervention and uphold constitutional principles. Unfortunately, history has often proven otherwise, especially when it comes to financial markets.

March 12, 2024 • Commentary 

By [Norbert J. Michel](https://www.cato.org/people/norbert-michel) 

This article appeared on [Forbes​.com](https://forbes.com) on March 12, 2024.

Last Thursday, two Congressional hearings took place in the U.S. House of Representatives that demonstrate just how far America has drifted from its founding principles. Both hearings were at 10:00 am—I testified at [one](https://judiciary.house.gov/committee-activity/hearings/hearing-weaponization-federal-government-6) and my colleague Nick Anthony testified at the [other](https://www.youtube.com/watch?v=8khhVtKGpZE).

Disappointingly, both hearings demonstrate that any principle, no matter how foundational, can take a backseat to politics. Even the Constitutional Amendments in the [Bill of Rights](https://www.aclu.org/documents/bill-rights-brief-history) are at risk, a danger that was clearly demonstrated by the attacks on personal financial privacy discussed during the hearings.

One of those—[the Fourth Amendment](https://constitution.congress.gov/constitution/amendment-4/)—was the subject of the hearing where I testified. It’s the one the founders included to protect Americans from warrantless government searches, and its origins date to the Stamp Act, a law passed by the English Parliament in 1765.

After the Stamp Act was passed, British customs inspectors regularly ransacked American colonists’ homes in search of contraband, even if they had no reason to believe the resident had violated the Stamp Act. Colonists hated these “warrantless” searches so much that securing protection [against them](https://constitution.congress.gov/constitution/amendment-4/) became a necessary condition for ratifying the Constitution.

While the Fourth Amendment generally guarantees that Americans can only have their “persons, houses, papers, and effects” searched after law enforcement obtains a warrant (by demonstrating [probable cause](https://www.law.cornell.edu/wex/probable_cause) to a judge), this protection no longer applies to Americans’ financial records.

Most people I encounter have no idea this is the case, much less why. But it’s true, and it’s thanks to the [Bank Secrecy Act of 1970](https://www.cato.org/policy-analysis/revising-bank-secrecy-act-protect-privacy-deter-criminals) and the expansive federal anti-money laundering framework built on it. As a result, the government has *warrantless* access to the financial records of anyone with a bank account. In fact, it’s not just banks—the same rule applies broadly to “[financial institutions](https://www.heritage.org/markets-and-finance/report/financial-privacy-free-society#_ftnref29)” ranging from jewelers to casinos.

My [colleagues](https://www.cato.org/policy-analysis/right-financial-privacy) [and I](https://www.cato.org/policy-analysis/revising-bank-secrecy-act-protect-privacy-deter-criminals) have long argued that the Fourth Amendment *should* apply to Americans’ financial records, and that’s the testimony I gave last Thursday. Congress could [easily](https://www.cato.org/policy-analysis/right-financial-privacy) [amend](https://www.cato.org/policy-analysis/revising-bank-secrecy-act-protect-privacy-deter-criminals) the Bank Secrecy Act to restore this protection to Americans.

While the Fourth Amendment generally guarantees that Americans can only have their “persons, houses, papers, and effects” searched after law enforcement obtains a warrant (by demonstrating probable cause to a judge), this protection no longer applies to Americans’ financial records.

Sadly, none of the Democratic members at the hearing substantively addressed how the Fourth Amendment has been undermined over the years. By my count, only one Democratic member (Rep. John Garamendi, D‑CA) said it was important for Congress to discuss whether the Fourth amendment should apply to Americans’ financial records.

The truth is *losing* the Fourth Amendment is a radical departure from how the American Constitution protects citizens from the government. Apparently, this fact warrants repeating. (Pun intended.)

The topic of the [second hearing](https://www.youtube.com/watch?v=8khhVtKGpZE) from last Thursday was “Politicized Financial Regulation,” and it focused primarily on President Biden’s so-called “[war on junk fees](https://www.whitehouse.gov/briefing-room/statements-releases/2023/10/11/biden-harris-administration-announces-broad-new-actions-to-protect-consumers-from-billions-in-junk-fees/).”

As my colleague [Nick Anthony testified](https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=409164), the Consumer Financial Protection Bureau has recently proposed price controls for credit card late fees, overdraft fees, and nonsufficient fund fees.

As Nick [pointed out](https://docs.house.gov/meetings/BA/BA20/20240307/116927/HHRG-118-BA20-Wstate-AnthonyN-20240307.pdf), economists have long understood that price controls lead to negative consequences and frequently harm those they are supposed to help. For example, Paul A. Samuelson—the first American to win the Nobel Prize in Economics—testified [to Congress](https://docs.house.gov/meetings/BA/BA20/20240307/116927/HHRG-118-BA20-Wstate-AnthonyN-20240307.pdf) in 1969 that interest rate caps (price controls in credit markets) would “result in drying up legitimate funds to the poor who need it most and will send them into the hands of the illegal loan sharks.”

In fact, one of the few things on which most economists agree is that price controls are a bad policy tool, and that’s [partly why](https://docs.house.gov/meetings/BA/BA20/20240307/116927/HHRG-118-BA20-Wstate-AnthonyN-20240307.pdf) the CFPB’s latest proposals have been met with a chorus of objections from economists and industry groups ([among others](https://docs.house.gov/meetings/BA/BA20/20240307/116927/HHRG-118-BA20-Wstate-AnthonyN-20240307.pdf)).

Still, the CFPB’s proposals are only the latest example of federal policymakers flirting with price controls, and it’s come from both Democrats and Republicans.

In 2017, for instance, a Republican-controlled Congress had the chance [to repeal the Durbin Amendment](https://www.forbes.com/sites/norbertmichel/2021/07/27/price-controls-do-not-work--even-in-credit-markets/?sh=6c469a61455d)’s price controls but chose not to do so. Special-interest politics trumped conservatives’ supposed principles even though price controls have such a dismal record.

Whether restricting rent, fast food prices, credit card late fees, overdraft fees, or NSF fees, price controls set a below-market clearing price that result in shortages because they reduce the incentive to supply those goods and services. And while they make it more costly to supply consumers, they do absolutely nothing to limit consumers’ demand. The consumers most in need typically lose the most.

In layman’s terms, people lose because they can’t get what they need.

Many people believe that conservative members of Congress reliably protect private markets from government intervention and uphold constitutional principles. Unfortunately, history has often proven otherwise, especially when it comes to financial markets.

Hopefully, these hearings are a sign that more members of Congress will uphold those principles. It should be easy to reaffirm the importance of the Fourth Amendment, and just as easy to ensure that private markets—not the federal government—should set prices.

##### About the Author 

[![Norbert Michel Cropped](/sites/cato.org/files/styles/author_picture/public/2025-01/norbert-m-cropped.jpg?itok=8WIx97Dk)](/people/norbert-michel) 

##### [Norbert J. Michel](/people/norbert-michel)

Vice President and Director, Center for Monetary and Financial Alternatives, Cato Institute

[ 

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