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From Banking and Finance Law Daily, August 6, 2015

Government funding bill ‘underfunds and undermines’ financial reform

By John M. Pachkowski, J.D.

The Office of Management and Budget has written to Sen. Thad Cochran (R-Miss), the Chairman of the Senate Appropriations Committee, expressing White House concerns over the recently-approved fiscal year 2016 Financial Services and General Government Appropriations bill.

The bill, one of 12 annual funding bills, would provide $20.6 billion in funding for the Treasury Department, Judiciary, Small Business Administration, Securities and Exchange Commission, Commodity Futures Trading Commission, and several other agencies.

Underfunds and undermines. After discussing the effects that the sequestration process would have on defense and non-defense, the OMB’s letter took issue that the bill underfunds and undermines critical financial reforms and consumer protections.

The letter noted that the full benefits of the Dodd-Frank Act “cannot be realized unless the entities charged with establishing and enforcing the rules of the road have the resources and independence to do so.” The letter continued that the “President has been clear that we have to fund Wall Street’s regulators at levels that allow them to do their important work.” For example, the bill would provide the Commodity Futures Trading Commission with $72 million in funding which is 22 percent less than requested in the President’s budget. Likewise, the bill would provide the Securities and Exchange Commission with $1.5 billion in funding, which is 13 percent less than requested by the Administration.

The OMB added that subjecting the Consumer Financial Protection Bureau to the appropriations process would “severely weaken its independence and undermine its ability to serve the most vulnerable consumer populations.” The letter further stated, “Independent funding and management are the foundations for ensuring that CFPB can examine all institutions fairly and provide a level playing field” and “[p]oliticizing the funding and management of bank supervision would be a giant step in the wrong direction.”

Problematic ideological riders. The letter also addresses the issue of “highly problematic ideological riders.” One of the riders that piqued the administration’s ire was “a 236-page package of unrelated special interest text that would undercut Wall Street reform.”

The text was S. 1484, the Financial Regulatory Improvement Act of 2015, which was introduced by Senate Banking Committee Chairman Richard Shelby (R-Ala). The bill was approved by the Banking Committee, along party lines, in May 2015. Shelby also sits on the Appropriations Committee (see Banking and Finance Law Daily, May 21, 2015).

The OMB noted that the attached legislation would impede “regulators’ ability to better oversee and address risks in the financial system, eroding safeguards in mortgage markets, letting large financial institutions off the hook for risky practices, and increasing the deficit, all under the guise of ‘regulatory relief.’” The letter concluded, “Attempting a wholesale roll back of Wall Street reform by way of ideological riders on an appropriations bill is a cynical abuse of the Government’s funding process.”

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