Banking & Financial Institutions

Ryan budget sets sights on Dodd-Frank

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The latest budget blueprint from Rep. Paul Ryan (R-Wis.) again targets several main pieces of the Dodd-Frank financial reform law. [READ RYAN’S BUDGET PROPOSAL.]

The proposal from the House Budget Committee chairman would repeal a top provision of the law. Proponents say the tool, which gives the Federal Deposit Insurance Corporation the power to step in and wind down a failing financial firm, bars future bailouts. But Ryan and Dodd-Frank skeptics say it does just the opposite, saying the law “only sustains them.”

{mosads}Ryan’s plan also would bring the budget of the Consumer Financial Protection Bureau (CFPB), a longtime GOP target, under the control of congressional appropriators.

The GOP fiscal roadmap has little to no chance of becoming law, as is the case with the president’s budget proposal. But Ryan’s plan shows that nearly four years after its enactment, Dodd-Frank remains a potent target for Republican critics.

Ryan’s budget repeatedly cites the financial overhaul as an example of costly and ineffective measures pushed by the president, alongside ObamaCare and the stimulus package. Although conservatives have not tried to repeal the financial reform law outright, they have repeatedly targeted several provisions of it.

Republicans have frequently targeted the FDIC’s new wind-down authority, and instead prefer a new bankruptcy regime to deal with the potential collapse of large banks. But GOP lawmakers also have frequently tried to repeal that provision because it is attractive from a budget perspective. The Congressional Budget Office has determined that repealing the provision would save $22 billion, but that analysis is limited by the 10-year budget window adhered to by the fiscal scorekeeper.

At first, the FDIC could access taxpayer funds to help guide banks to an orderly exit, but the law states that those funds would eventually be recouped by fees assessed to the financial industry. But since those funds would return over a longer period of time, they are not captured in the CBO’s analysis, leading Democrats to blast Republicans as playing budgetary games to come up with phantom savings.

Republicans have tried several times over the years to gain more control over the CFPB’s budget as well. Calling the Dodd-Frank creation unaccountable and too powerful, Republicans have repeatedly pushed to subject its budget to appropriations, and Ryan’s plan would do that yet again.

Currently, the CFPB receives funding directly from the Federal Reserve, and the bureau’s backers point out that other banking regulators also enjoy a funding stream free of lawmaker input.

But Ryan contended in his budget that this arrangement actually carries a fiscal cost. Under law, the Fed sends whatever profits it makes, absent operating costs for it and the CFPB, back to the Treasury Department to pay down the deficit. In 2014, the Fed sent the government $79.6 billion – in fiscal 2014, the CFPB can receive as much as $608.4 million.

Tags CFPB Dodd–Frank Wall Street Reform and Consumer Protection Act Paul Ryan Systemic risk

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