2019 Trump budget places oversight groups under congressional appropriations process

Noting that it is committed to “rolling back the regulatory excesses” of financial institution rule reform adopted in the wake of the Great Recession, the Trump Administration’s 2019 proposed budget recommends subjecting funding for two federal financial regulatory oversight groups to the congressional appropriations process.

The budget proposal, released Monday by the White House Office of Management and Budget (OMB), recommended that the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) – both established in 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) – should be funded through appropriations by Congress.

Doing so would require an act of Congress.

Under Dodd-Frank, any FSOC expenses are treated as expenses of, and paid by, the Office of Financial Research through the Financial Research Fund (also established under Dodd-Frank). The research fund, which resides at Treasury, is itself funded through assessments charged on banks with more than $50 billion in assets and systemically important nonbank financial companies supervised by the Federal Reserve Board.

Additionally, the FSOC may draw on resources of any department or agency of the federal government, whose employees may be detailed to FSOC without reimbursement; members of FSOC who are federal government employees serve without additional compensation.

In its proposed budget, the Trump Administration notes it is “committed to reforming the Nation’s financial system” and rolling back the “regulatory excesses” mandated under Dodd-Frank.

“Since issuance of the Core Principles EO (Executive Order) in February 2017, Treasury has published several reports making numerous recommendations for administrative and statutory reforms. These reviews included evaluation of the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR), both established by the Dodd-Frank Act,” the budget document states.

“The Budget proposes to impose appropriate congressional oversight of these functions by subjecting all Treasury FSOC and OFR activities to the normal appropriations process,” it notes.

The document also states that it reflects continued reductions in OFR spending commensurate “with the renewed fiscal discipline being applied across the Federal Government.”

“Treasury is also working to increase the transparency of FSOC decision-making procedures and to implement more rigorous cost-benefit analysis standards,” it states.

The proposed 2019 budget makes no recommendations about subjecting the budgets of federal financial institution regulators to the appropriations process (including CFPB); those agencies are largely “independent” agencies funded by fees assessed on the institutions they regulate.

In another area, the budget eliminates funding for the Community Development Financial Institutions (CDFI) Fund’s discretionary grant and direct loan programs, “a savings of $234 million from the 2017 enacted level,” it states.

“The CDFI Fund was created more than 20 years ago to jump-start a now mature industry. In addition, private institutions should have ready access to the capital needed to extend credit and provide financial services to underserved communities,” the document states.

However, funding for administrative expenses to support ongoing CDFI Fund program activities, including the New Markets Tax Credit program, will be maintained. Additionally, the budget also proposes to extend the CDFI Bond Guarantee Program, which the document states “offers CDFIs low-cost, long-term financing at no cost to taxpayers, as the program requires no credit subsidy.”

FY 2019 proposed federal budget/OMB