Senate Republican Bill Would Undermine Critical Financial Reforms and Consumer Protections

Wall Street Reform built a stronger and more stable foundation for economic growth and made our financial system safer and more resilient by curbing excessive risk-taking, closing regulatory gaps, and putting in place the strongest consumer financial protections in history. However, its full benefit to our Nation's citizens and the economy cannot be realized unless the entities charged with establishing and enforcing the rules of the road have the resources and independence to do so.  That’s why the President has been clear that we have to fund Wall Street’s regulators at levels that allow them to do their important work, and he’s repeatedly proposed funding levels in each year’s Budget that would be sufficient to implement Wall Street Reform.  And that is also why he has repeatedly fought to keep our regulators free from the political whims of Congress.

This week marked the fifth anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and we saw Democrats united in their commitment to defend it. As Democrats in Congress expressed in a report, “Republican appropriators in the House undercut the SEC and CFTC by refusing to adequately increase their funding, despite the fact that they are given significant new responsibilities under Dodd-Frank.”  We agree. 

Just days after marking this milestone, Republicans are making another attempt to gut these important reforms. Senate Republicans have introduced a bill that proposes almost the same unacceptable overall funding level as proposed by the House earlier this year and includes more objectionable attempts to undermine critical financial reforms and consumer protections.  The bill would impede regulators’ ability to better oversee the financial system and would erode safeguards in mortgage markets by leaving large financial institutions unaccountable.

Republicans have put forward bills that would undermine Wall Street’s watchdogs by funding them at levels well below what is needed to implement reform.

• Securities and Exchange Commission (SEC): Compared to the President's Budget, the Republicans would cut funding for the SEC by $222 million, or 13 percent, hindering its enforcement, examination, and market oversight functions and thereby reducing investor protections.
   
• Consumer Financial Protection Bureau (CFPB):  Republicans would subject the CFPB to annual appropriations, which would weaken its independence and undermine its ability to serve the most vulnerable consumer populations. Politicizing the funding of bank supervision would be a step in the wrong direction.
   
• Commodity Futures Trade Commission (CFTC): Compared to the President’s Budget, Republicans would cut funding for the Commodity Futures Trading Commission by at least $72 million, or 22 percent, which would hamstring the CFTC’s ability to protect our economy from the kinds of recklessness and excessive risk-taking that caused so much harm during the financial crisis.

In addition to underfunding the regulators, Republicans have included a large package of unrelated, partisan, special interest riders that would undercut Wall Street reform by impeding regulators’ ability to better oversee the financial system; eroding safeguards in mortgage markets; and letting large financial institutions off the hook, under the guise of regulatory relief for community banks. This tactic of using riders on budget legislation to chip away at crucial financial reforms is unacceptable, and the Administration has made clear we will strongly oppose these efforts. 

These are just examples of the broader Republican strategy to fund the government at the lowest level in a decade and undermine an orderly appropriations process by including highly problematic ideological provisions.  The only path forward in the appropriations process is for Congressional Republicans to join Congressional Democrats at the negotiating table and reach a commonsense bipartisan deal that lifts sequestration.  With strong job growth since the last bipartisan budget agreement and so much progress made reforming Wall Street since the crisis, there is no reason to go backwards by undoing critical protections that build a safer and stronger financial system.

Shaun Donovan is the Director of the Office of Management and Budget.