Committee Votes to End Dodd-Frank Bailout Fund, Place CFPB Spending on Budget
Washington,
April 13, 2016 -
The House Financial Services Committee approved bills today that repeal the Dodd-Frank Act’s bailout fund for large, complex financial institutions and make the CFPB more accountable to taxpayers by putting its spending on budget.
“When it comes to the resolution of these large, complex financial institutions, should we have bailouts or should we have bankruptcy? I think most people, particularly on the Republican side of the aisle, believe there should be bankruptcy. No sweetheart deals, no more AIG deals where foreign creditors get 100 cents on the dollar; the bankruptcy process is far superior. There is no one financial institution that should be deemed ‘too big to fail’ and others ‘too small to matter,’ said Chairman Jeb Hensarling (R-TX).
The bill to end the bailout fund, sponsored by Rep. Lynn Westmoreland (R-GA) and approved by the committee 34-22, repeals Dodd-Frank’s “Orderly Liquidation Authority” that has made bailouts a permanent fixture in the regulators’ toolkit. Under this authority, the FDIC can borrow from the Treasury to lend to a failing firm, purchase its assets, guarantee its obligations and pay off its creditors.
In order to “resolve” certain large institutions, Dodd-Frank empowers the FDIC to borrow potentially trillions of dollars to carry out these responsibilities.
From the very outset of the financial reform debate in 2009, House Republicans have called for large, complex financial institutions to be resolved under the Bankruptcy Code rather than Dodd-Frank’s open-ended taxpayer-funded bailout authority. Earlier this week, the House passed overwhelmingly bipartisan legislation, the Financial Institution Bankruptcy Act, which creates a new bankruptcy chapter for failing banks.
In addition to ending Dodd-Frank’s bailout fund, the committee also approved by a vote of 33-20 the Taking Account of Bureaucrats’ Spending Act sponsored by Rep. Andy Barr (R-KY). The bill makes the CFPB accountable to taxpayers and ensures effective oversight by Congress. The drafters of Dodd-Frank purposely made the Bureau exempt from oversight and the normal checks and balances of the budget and appropriations process. As a result, the Bureau’s director can spend hundreds of millions of dollars each year with no oversight or control from Congress, the president or any executive branch agency or official.
“Every government agency should be accountable to the elected representatives of ‘We the People’ and the CFPB should not be an exception to that rule,” said Chairman Hensarling. “We have the Pentagon which is on budget. We have the Justice Department which is on budget. There is certainly no greater duty we have than to provide for the common defense, and we do not let the Pentagon write its own budget. We should not let the CFPB write its own budget. It is a base matter of congressional oversight and of Article I authority.”
The bill approved by the committee authorizes $485.1 million for the CFPB, the same amount that CFPB Director Richard Cordray determined was necessary to fund the Bureau during the most recent fiscal year.
