Eliminating Treasury’s Office of Financial Research, replacing the “orderly liquidation authority” with bankruptcy provisions, realigning the Dodd-Frank Act and establishing a “rules-based” monetary policy are issues to be reviewed by a House committee its markup Tuesday of “views and estimates” for the next fiscal year.
In the committee print issued by the House Financial Services Committee Thursday outlining its “views and estimates” of government program’s under the committee’s jurisdiction, the panel details a list of planned legislative initiatives and their financing for the next fiscal year.
The print will be the outline for the committee’s markup of the “views and estimates” before submission to the House Budget Committee. The markup is set for Tuesday (March 6) at 10 a.m. ET.
Among the items affecting federal financial institution regulation are:
Dodd-Frank Act, regulatory reform
The print states that the committee remains “gravely concerned” that the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) has “failed to achieve its proponents’ stated goals of promoting the financial stability of the United States, ending ‘too big to fail’ and taxpayer bailouts, and protecting consumers.”
Instead, the panel stated its believes that Dodd-Frank Act has “endangered taxpayers and our economy by enshrining ‘too big to fail’ in statute, creating endless new regulatory mandates from Washington that have resulted in fewer and more expensive financial products and services, increased moral hazard in markets by failing to address the true causes of the financial crisis, and hampered economic growth.”
The committee noted that it has sent to the House floor a number of measures to amend Dodd-Frank or provide regulatory relief (H.R. 10, Financial CHOICE, H.R. 1116, the TAILOR Act, H.R. 2121, the Pension, Endowment, and Mutual Fund Access to Banking Act; H.R. 4061, the Financial Stability Oversight Council Improvement Act of 2017).
However, the committee also states that it “disagrees” with the Congressional Budget Office (CBO) scores received for each of those measures. It stated that it “requests that the FY19 Budget Resolution provide the necessary funding to resolve the costs associated with these bills.”
Orderly Liquidation Authority
The print also takes on the “Orderly Liquidation Authority” (OLA) established under Dodd-Frank (meant to assist in resolving failing financial institutions). The print asserts that the provision “perpetuates the government guarantee enjoyed by creditors during the recent financial crisis, which entrenched the ‘too big to fail’ problem and placed taxpayers on the hook for multi-billion-dollar bailouts of large financial institutions.”
Accordingly, the print states, the committee supports replacing OLA with established bankruptcy procedures, “wherein shareholder and creditor claims are resolved pursuant to the rule of law rather than the arbitrary discretion of regulators.”
Office of Financial Research
The print notes the committee’s view that the Office of Financial Research (OFR, established under Dodd-Frank and meant to provide objective research about the state of the financial system) should be abolished. The “committee remains concerned about the scope, redundancy, and potential for misuse of the OFR’s powers as well as Congress’s limited oversight of the OFR and its funding,” the print states. “The previously mentioned, H.R. 10, the Financial CHOICE Act, eliminates the OFR and the Committee intends to advance similar legislation in this Congress.”
Consumer Financial Protection Bureau (CFPB)
Adhering to past positions, the print questions the consumer bureau’s accountability to the public. “The Committee continues to believe that the CFPB’s structure and funding make it uniquely unaccountable to the President, the Congress, and the American people,” it states.
The print gives a nod to acting CFPB Director Mick Mulvaney (a former member of the committee) for imposing temporary regulation and hiring freezes, as well as ordering a review of active investigations and lawsuits. Nonetheless, the print notes, “the Committee will continue to advance legislative proposals, such as H.R. 10, the Financial CHOICE Act, to enhance accountability and greater transparency at the CFPB.”
Along those lines, the print states, committee will continue to seek reforms to CFPB’s operations and structure, including subjecting the CFPB to congressional appropriations process, and “reforming the CFPB’s statutory mandate to ensure that it takes into account, and seeks to promote, robust market competition.”
Federal Reserve System
Concern is also expressed by the committee (via the print) about the “expanded regulatory mission” of the Federal Reserve and the “inability of the Board of Governors to articulate clear guidance for how it plans to conduct monetary policy.”
“Over-reliance on the Federal Reserve to manage virtually every aspect of the U.S. economy runs the risk of compromising the Federal Reserve’s independence and placing taxpayers at greater risk in the event that regulatory failure by the Federal Reserve contributes to another significant or prolonged economic downturn,” the prints.
The print calls for achieving a more stable and rules-based monetary policy that it asserts would realize larger benefits for taxpayers and economy at large. In addition, it states, the Financial CHOICE Act “promotes greater accountability at the Federal Reserve as it would fund the non-monetary activities of the Federal Reserve’s Board of Governors and the 12 regional banks through the congressional appropriations process.”