For all intents and purposes, President Trump’s proposed budget for fiscal year 2021 won’t see the light of day as it stands. But that doesn’t mean regulators in the crosshairs shouldn’t be on notice regarding his administration’s thinking.
According to the budget, released Monday, the Public Company Accounting Oversight Board (PCAOB) and Consumer Financial Protection Bureau (CFPB) could face significant changes in the years ahead. President Trump’s proposal effectively calls for an end to the PCAOB beginning in 2022, while the CFPB would be subject to major funding cuts as soon as next year.
Trump’s proposed budget next heads to the House, where it is sure to be shredded by the Democratic majority. Where things will stand following their review remains to be seen.
For now, the vultures have begun circling the PCAOB as the proposed budget calls for the audit regulator to essentially be absorbed by the SEC beginning in 2022. The SEC already has oversight authority over the PCAOB, which was created in 2002 by the Sarbanes-Oxley Act.
The proposed budget projects $580 million in savings through 2030 if the PCAOB is folded. “SEC is already charged with investigating Federal securities law violations and has the authority to impose disciplinary action, including for public accounting firms that are also overseen by PCAOB,” the budget states. “Consolidating these functions within SEC will reduce regulatory ambiguity and duplicative statutory authorities.”
The PCAOB has come under fire in recent months, most notably when the Wall Street Journal in October published a whistleblower letter about the agency permeating a “sense of fear” due to “numerous terminations … [some] driven by retaliation.” The whistleblower letter was reportedly written by a group of current and former PCAOB employees.
Also a frequent source of critique is the CFPB, which is set to face the Supreme Court next month in a case reviewing whether its structure is unconstitutional. Adding to the independent financial regulator’s woes, President Trump’s budget calls for a “restructure” that would include funding being trimmed by $110 million in 2021.
Further, Trump wishes for the CFPB to be funded by discretionary appropriations beginning in 2022, which the budget projects would lead to $625 million in savings.
“The Budget proposes legislative reforms to restructure and bring accountability to the CFPB. The proposed reforms would reinforce financial discipline, reduce unnecessary spending, and ensure appropriate congressional oversight. … The proposal would also cap transfers by the Federal Reserve Board to the CFPB during 2021 to $485 million, equivalent to the 2015 level. These changes would allow the CFPB to focus its efforts on enforcing enacted consumer protection laws,” the budget states.
The budget requests $31.7 billion for the DOJ, a $730 million (2.3 percent) decrease from the 2020 enacted level. Extra money would be provided to combat the opioid crisis and to increase the staff of the Antitrust Division, among other areas.
The SEC would see its budget rise from just over $1.8 billion in 2020 to north of $1.9 billion in 2021. Among the SEC’s intended enhancements would be a greater focus on cyber-security and more positions added to the Office of Compliance Inspections and Examinations.