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From Banking and Finance Law Daily, July 27, 2015

Dems, industry groups react strongly to Senate funding bill

By Colleen M. Svelnis, J.D.

Congressional and industry reactions continue following the full Senate Appropriations Committee approval of a government funding bill with Dodd-Frank Act changes in tow. The legislation would replace the Consumer Financial Protection Bureau’s independent source of funding and subject it to the annual Congressional appropriations process, along with changing the bureau from a directorship to a five-member commission. Responses from Democrats and industry associations were immediate and vociferous following the July 24 action (see Banking and Finance Law Daily, July 24, 2015) on the FY2016 Financial Services and General Government Appropriations bill, introduced by Sen. Richard C. Shelby (R-Ala).

‘Partisan’ rider. Senate Banking Committee member Bob Menendez (D-NJ) expressed his displeasure with the “partisan financial reform rollback” bill, which he says “does nothing to force concessions on either financial reform or government funding.” Menendez said that a “bipartisan deal is there if Republicans want it, but making threats only weakens their hand by demonstrating a lack of good faith engagement.” Menendez called the CFPB “one of the cornerstone accomplishments of the Wall Street Reform Act,” saying it “has done outstanding work in just four years of existence to protect consumers. It would be a serious mistake to undermine the CFPB’s ability to protect consumers by weakening its funding and governance.”

Sneak attack on reform. Americans for Financial Reform called the funding measure “an outrageous sneak attack on the Consumer Financial Protection Bureau and the reforms of the Dodd-Frank Act.” A statement released by the AFR stated that the bill “would roll back crucial Dodd-Frank protections affecting everything from risk management at giant financial institutions to safeguards against the kinds of toxic subprime mortgages that caused the financial crisis.”

“The bill includes policy riders that would dramatically weaken the CFPB, making it the only bank regulator which does not have independent funding, and replacing its single director with a five-member commission—a known recipe for gridlock.”

The statement also pointed out that the bill would freeze funding for the Commodity Futures Trading Commission “at levels far below what is needed to implement the CFTC’s new responsibilities for oversight of the multi-hundred trillion dollar global derivatives markets.”

Threatens CFPB viability. A statement by the Consumer Federation of America said the bill “threatens the viability” of the bureau by “drastically weakening its funding mechanism, organizational structure and reporting requirements.” The statement said that “tying the hands of the CFPB is contradictory to what American consumers need and expect. The CFPB already extensively reports to Congress and senior Bureau staff has testified before Congress 55 times. The funding structure of the CFPB was specifically drafted like every other bank regulator to be insulated from partisan and special interest attacks. Modifying the single director structure of the Bureau to a five-member commission would thwart the agency from quickly working to ensure fairness in the financial marketplace.”

Independent funding necessary. Aaron Klein, director of the Financial Regulatory Reform Initiative at the Bipartisan Policy Center responded to the committee’s action by calling it a “mistake.” He stated that “Financial regulators have independent funding precisely because they have to make politically unpopular choices that are in the best interest of our economy and our citizens.”

Klein said his organization believes that the CFPB’s accountability could be improved through “the creation of a dedicated, independent inspector general for the CFPB, which has been proposed in Congress. Congress should move in that direction to keep the bureau accountable and should not change the CFPB’s funding source to appropriations.”

Undermining consumer protections. National Community Reinvestment Coalition President and CEO John Taylor released a statement including the following: “The Shelby provisions inserted into the appropriations bill roll back key elements of Dodd-Frank that ensure the safety and soundness of the nation's banking system and provide consumer protections. They would undermine key safeguards and the increased regulatory oversight for some of the nation's largest and most systemically important bank and non-bank financial institutions, and rob the CFPB of the independence needed to carry out its responsibilities on behalf of consumers."

Insult to Americans. Public interest organization, Better Markets released the following statement by its President and CEO, Dennis Kelleher: “Today’s actions by the Republicans on the Senate Appropriations Committee to de-regulate Wall Street while under-funding the Wall Street cops at the CFTC and SEC are an insult to the American people who are still suffering from the last crash. This Wall Street wish list of irresponsible provisions is going to make another financial crash and economic calamity more likely. With the nationwide wreckage from the last crash costing American families more than $20 trillion in lost jobs, homes, savings, retirements, and so much more, unleashing Wall Street to do that again is indefensible.”

Companies: Americans for Financial Reform; Better Markets; Consumer Federation of America; Financial Regulatory Reform Initiative; National Community Reinvestment Coalition

MainStory: TopStory CFPB DoddFrankAct FinancialStability SecuritiesDerivatives

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