A funding measure approved by the Senate Appropriations Committee yesterday contains an outrageous sneak attack on the Consumer Financial Protection Bureau and the reforms of the Dodd-Frank Act. The FY2016 Financial Services and General Government Appropriations bill incorporates the entirety of a 229-page financial deregulation bill – one that had been rejected by every Democrat on the Banking Committee, the proper venue for such legislation. This bill would roll back crucial Dodd-Frank protections affecting everything from risk management at giant financial institutions to safeguards against the kinds of toxic subprime mortgages that caused the financial crisis. (For more detail, see the AFR opposition letter here.)
In addition to this dangerous rollback of financial regulations, the legislation takes aim at the Consumer Financial Protection Bureau, despite, or perhaps because of, its success in making the consumer finance markets safer and fairer. The bill includes policy riders that would dramatically weaken the CFPB, making it the only bank regulator which does not have independent funding, and replacing its single director with a five-member commission – a known recipe for gridlock.
These highly controversial and partisan policy proposals are dangerous to the public interest, and they reflect a totally inappropriate use of the appropriations process. Spending bills should not be used as back-door vehicles for reversing vital (as well as broadly supported) protections against Wall Street abuses.
The bill would also freeze funding for the Commodity Futures Trading Commission at levels far below what is needed to implement the CFTC’s new responsibilities for oversight of the multi-hundred trillion dollar global derivatives markets.
The financial crisis of 2008 led to reforms that have begun to protect consumers and reduce the risk of another catastrophe. This legislation would reverse that progress and make the regulatory environment friendlier for the very worst elements of the banking and lending industries. The Appropriations Committee and the Senate should firmly reject it.