Democratic Members of the House Financial Services Committee today issued dissenting views to the budget reconciliation legislative recommendations which passed the committee last week on a straight party line vote.

Republican Members of the committee claim that the legislation will cut the deficit by approximately $35 billion over a 10-year period.  However, independent observers have called the savings a “wild assumption” and “bogus.”

One section of the budget reconciliation language would repeal a key title of the 2010 Wall Street Reform and Consumer Protect Act.  Committee Democrats write in their dissenting views that “the Republicans have used the reconciliation vehicle as a means of achieving what they have been unable to do through the regular legislative process, namely repeal the section of the Financial Reform bill… that provides for a way to deal with large financial institutions that have become too indebted to exist.”  The Republican language would eliminate Orderly Liquidation Authority (OLA), the provision in the Financial Reform law which makes it possible to wind down failing firms while minimizing damage to the greater economy. The Wall Street Reform Act specifically states that the OLA provision will put no cost on taxpayers and that any funds borrowed in the short term to liquidate a company will be repaid in the long term by the largest financial institutions.

During last week’s markup, Congressman Barney Frank and Congressman Luis Gutierrez offered an amendment which would provide another way of paying for any costs associated with orderly liquidation – a $30 billion levy on the largest financial institutions to be collected up front over a ten year period.  Every Republican voted to defeat the amendment.  This recent disagreement over whether large financial institutions should bear the burden for the future failure of a systemically-important firm echoed a similar conflict during the House-Senate conference on the Wall Street Reform bill in 2010, during which Republicans, led by Senators Scott Brown (R-MA) and Susan Collins (R-ME), demanded that a $19 billion fee on the largest financial institutions be removed from the final bill. 

In their dissenting views, Democrats also criticized a second provision in the Republican budget reconciliation language which would force the new Consumer Financial Protection Bureau (CFPB), which currently derives its budget from the Federal Reserve, to be funded through the annual appropriations process.  The result would be to make funding less certain and to make the CFPB more subject to political pressures.  Republicans, who had opposed the creation of the CFPB during the markup of the Financial Reform bill in 2009, claimed last week that this provision in the budget reconciliation language merely was intended to make the CFPB accountable to Congress.  Democrats called out Republicans on this point, stating in their dissent that “Republicans further used reconciliation for ideological purposes by singling out the Consumer Financial Protection Bureau of all banking regulatory agencies to be subject to appropriations,” noting that neither the Federal Reserve, the Office of the Comptroller of the Currency, nor the Federal Housing Finance Authority was subject to the same process. 

During the markup of the budget reconciliation legislative recommendations, Ranking Member Barney Frank offered an amendment intended to highlight the hypocrisy of those who called for additional budget oversight of the CFPB.  His amendment required that the Federal Reserve’s “non-monetary policy administrative budget” be subject to the annual appropriations process just as the CFPB would be in the Republican bill. Republican Members, a number of whom have been roundly critical of the Federal Reserve, were visibly uncomfortable as a large majority of them voted to preserve the independence of that institution. 

In their dissenting views, Democrats also criticized the Republican plan to eliminate the Home Affordable Modification Program (HAMP) which, although falling short of expectations, has prevented foreclosure on hundreds of thousands of American families.  The signers bluntly stated that “this is in line with the Republican philosophy that the federal government should do nothing to deal with the crisis in housing.”