A looming battle over the survival of Wall Street reform laws intensified late last week on Capitol Hill, as Republican appropriators took steps to roll back measures enacted after the 2008 economic collapse that Democrats have vowed to protect.
The House Appropriations Committee held a full committee markup session that may mean the beginning of the end for a variety of controversial regulations that have been in place since mid-2010. Specifically, the committee passed bills to the full House that would reduce or strip funding and powers from the Securities and Exchange Commission and the Consumer Financial Protection Bureau.
The Internal Revenue Service, which investigates investment fraud along with the SEC, would be hit particularly hard by the committee’s cuts should they become law. The IRS would receive just $10.9 billion for the 2017 fiscal year, which is $236 million below this year’s enacted level, $1.3 billion below President Obama’s request and lower overall than any year since 2008.
“This bill is notable for the good work it does on two fronts: directing funding where it’s needed most to grow the economy and enforce our laws, and tightly holding the reins on overspending, overreach, and waste within the federal bureaucracies,” Appropriations Committee Chairman Hal Rogers (R-Ky.) said.
But Democrats scoffed at the committee’s action, accusing Republicans of using the Appropriations process to accomplish ideological goals. They said the lower funding would hamper the government’s ability to monitor fraud by investors and risk by large financial institutions, thereby jeopardizing the U.S. economy all over again.
The Appropriations Committee’s top Democrat, Rep. Nita Lowey of New York, said the committee’s bill was full of “egregious poison-pill riders,” and offered an amendment to remove 30 of them – and effort that failed. (A "rider" is an addendum to an Appropriations bill that effectuates a policy change by forbidding any money from being spent for a particular purpose.)
The growing fight is over a set of reforms to the financial system known in congressional shorthand as “Dodd-Frank,” named after former Sen. Chris Dodd of Connecticut and former Rep. Barney Frank of Massachusetts, who pushed the package through Congress in 2010. But the votes broke down sharply along party lines, and the reforms have remained controversial ever since they were signed into law by President Obama that year.
In the Senate, Democrats Chris Coons of Delaware and Jeff Merkley of Oregon – both members of the Senate Appropriations Committee – have vowed that these new Repubican measures won’t pass in the upper chamber, since Democrats control 46 seats and can thereby block legislation procedurally. It also isn’t likely to be signed into law as long as Obama is in office, they have noted.
Coons and Merkley want a “clean” House bill that doesn’t contain the controversial riders, and cite “strong, continued, bipartisan support” from Americans for financial regulations and consumer protections.
The two senators twice scheduled and then cancelled press conferences this week to draw attention to their cause, but Democrats on the House panel on Thursday were outspoken in their place, particularly about the IRS cuts.
“By continually cutting the IRS, we are simply empowering tax cheats and confusing honest taxpayers,” said Rep. Jose Serrano (D-N.Y.), the top Democrat on the panel’s Financial Services Subcommittee.
Republicans did not signal interest in responding to the Democratic attacks on Thursday. Jennifer Hing, a spokeswoman for the GOP side of the Appropriations committee, told AMI Newswire simply that “the draft bill represents the committee’s position on these issues.”
Besides Republican appropriators, other GOP leaders have made no secret of their intent to dismantle the Wall Street reforms. Rep. Jeb Hensarling, a Texas Republican who chairs the House Financial Services Committee, on Tuesday publicly announced plans to repeal the 2010 law.
Under Hensarling’s plan, federal regulators would no longer be able to oversee or constrain certain large financial institutions that are considered “systemically important,” while large banks would be exempted from a controversial rule prohibiting them from making speculative investments with taxpayers’ deposits. Lastly, the Consumer Financial Protection Bureau would be limited in its ability to regulate the payday lending and debt collection industries.
In a speech to the Economic Club of New York, Hensarling called the Dodd-Frank law a “breathtaking, unconstitutional outsourcing of legislative powers to the executive branch, with the Orwellian-named Consumer Financial Protection Bureau and the Financial Stability Oversight Council.”
Republicans tried last year to gut much of the Dodd-Frank law in the Senate Appropriations process, but the omnibus funding bill that eventually cleared Congress was free of the provisions.
Beyond Capitol Hill, the struggle over the Dodd-Frank law is being watched closely. Last month, a group of 254 organizations led by Americans for Financial Reform lobbied Congress in an open letter to keep the controversial law.
“Last year Congress wisely rejected multiple efforts to use the budget process to force through unrelated ideological riders, including changes in financial regulation that would undermine consumer protections, endanger financial security, or reduce accountability for big banks,” the letter read. “It is vitally important that members remain committed to opposing such riders again this year.”