White House threatens veto for bill defunding Wall Street reform

The White House is threatening to veto a spending package it says would undermine the Dodd-Frank financial reform law by limiting funding to vital agencies.

The Office of Management and Budget (OMB) issued a statement Wednesday saying senior advisers would recommend the president veto an appropriations package for financial services and general government if it made it to the president's desk. The legislation was approved down a party-line vote by the House Appropriations Committee.

Among a litany of problems it identified with the package, OMB warned that the $19.9 billion package does not provide sufficient funding to the Internal Revenue Service (IRS), Securities and Exchange Commission (SEC), or the new Consumer Financial Protection Bureau (CFPB).

The bill would cut $606 million from the IRS — a move that would "seriously degrade" IRS services and lay off over 4,200 staff members. Given that tax enforcement and compliance typically returns $7 for each dollar spent, the funding cut would reduce revenue collections by $4 billion a year, the administration argued.

The CFPB, which has been repeatedly targeted by Republicans, would see its funding curbed and brought under the control of Congressional appropriators under the bill. When the CFPB begins work on July 21, it will receive its funding from the Federal Reserve. But the appropriations bill would cap that funding at less than half the $550 million it could currently receive and would have Congress set its budget beginning in 2013.

The White House said those moves would compromise the CFPB's independence and "severely undercut" its ability to monitor consumer financial products.

The administration similarly opposed the package's budget for the SEC, which is charged with implementing large chunks of Dodd-Frank. The appropriations package would keep SEC funding steady at $1.2 billion, but the White House asked for a $222 million budget boost for the agency after Dodd-Frank was enacted.

Refusing that budget hike would compromise the SEC's ability to monitor financial markets and its ability to carry out new Dodd-Frank responsibilities, the administration said. It also pointed out that the SEC is fully funded by fees it assesses on financial transactions, so curbing its budget has no impact on the budget deficit.

The administration also took the bill to task for a provision eliminating a program intended to help struggling homeowners modify their mortgages, which has underperformed since it was created, and one that eliminates funding for a new consumer product safety database.

It also criticized the package for including two policy riders limiting the District of Columbia from using funds for abortions and needle exchange programs.