Unable – for now, at least – to kill the Dodd-Frank Act legislatively, Congressional Republicans will at least try to starve it.
On Tuesday, the House Appropriations Committee released the Fiscal Year 2013 Financial Services and General Government Appropriations bill, which provides annual funding for various agencies, among them the Treasury Department, the Executive Office of the President, and the Securities and Exchange Commission. On Wednesday, during a “mark up” hearing, subcommittees agreed to regulator budget reductions with votes that divided along party lines.
The proposed bill, as initially filed, includes a total of $21.15 billion in funding for various government agencies, $376 million below last year's level.
For fiscal year 2013, the bill included $1.371 billion for the SEC -- $195 million below the amount sought by the Obama Administration, but $50 million above last year's budget. It bill, however, mandates that the $50 million increase be spent on information technology, costs that were initially intended to come from a separate reserve fund. The legislation includes a prohibition on all SEC from its “reserve fund,” a financial maneuver Republicans on the House Appropriations Committee described as “essentially a slush fund for SEC programs that Congress has not approved.”
The Agriculture Appropriations bill for FY 2013 includes $180 million for the Commodity Futures Trading Commission – a decrease of $25 million from the previous fiscal year and $128 million below the President's request. Similar to SEC funding, the bill mandates that $32 million of the total be spent on IT.
In a statement, U.S. Rep. Barney Frank (D-Mass.) reacted harshly to the spending bills.
“The Republican appropriations bills defining spending levels for agencies in charge of critical financial regulations is a declaration of unilateral surrender to the forces of irresponsibility that wrecked our economy several years ago and, as we have seen from recent events, might be poised to do it again,” Frank said. “ The fact that the Republican Party is lavishing money on weapons systems that the Pentagon does not want while reducing the necessary funds for the regulation of derivatives, is a textbook example of terrible priorities. At a time when JPMorgan Chase has reported the loss of $3 billion or more in the derivatives markets, the Republicans are refusing to appropriate a small percentage of that amount to provide the protections we need against a return to financial chaos.”
"I also find it unfortunate that in the immediate aftermath of a record trading loss at JPMorgan and a botched Facebook IPO, Republican leadership continues to opt for a 'self-regulatory' approach with Wall Street,” said House Appropriations Committee Ranking Member Rep. Norm Dicks (D-Wash.). “It is disappointing that after the worst financial collapse since the Great Depression, Republicans remain steadfast in underfunding financial reform efforts.”
House Appropriations Committee Hal Rogers (R-Ky.) offered a Republican viewpoint on the cuts Wednesday.
“We must act now to rein in deficits and reduce onerous regulations if we are to return to an economic climate where businesses small and large can flourish and put the American people back to work,” he said. “The bill before us reflects the commitment of this Subcommittee, the whole Appropriations Committee, and the full House of Representatives, to creating the foundation for a strong recovery by prioritizing key programs and rolling back unnecessary spending and regulatory burdens.”
Also on Wednesday, CFTC Chairman Gary Gensler responded to the proposed cuts to his budget.
“The result of the House bill is to effectively put the interests of Wall Street ahead of those of the American public by significantly underfunding the agency Congress tasked to oversee derivatives – the same complex financial instruments that helped contribute to the most significant economic downturn since the Great Depression,” he said. “The CFTC's hardworking staff is just 10 percent more in numbers than at our peak in the 1990s, yet Congress has now directed the agency to oversee the swaps market that is eight times larger than the futures market.”
“Picture the NFL expanding eightfold to play more than 100 football games in a weekend, leaving just one referee per game, and, in some cases, no referee. Imagine the mayhem on the field, the resulting injuries to players, and the loss of confidence fans would have in the integrity of the game,” Gensler added. “We would not want similar mayhem and loss of confidence in markets so critical to farmers, ranchers and end users that may result from this bill's significant underfunding of the CFTC.”
Also in the bill:
- A budget of $12.3 billion for the Treasury Department, which is $77 million above last year's level, but nearly $952 million below the President's request.
- An $11.8 billion budget for the Internal Revenue Service, the same as last year's level. The legislation does not provide any of the requested increases to implement the Patient Protection and Affordable Care Act (PPACA), and prohibits transfers of funds between the Department of Health and Human Services and the IRS to implement PPACA.
- The budget for the Executive Office of the President (EOP) is funded at $650 million, a reduction of $9 million. The proposed legislation also requires, as described in a statement by House Republicans, “reports from the EOP on several issues, including, in the words of the cost projections of implementing Dodd-Frank Act financial regulations, efforts to reduce regulatory burdens, and the effects of possible future sequestration budget cuts.”