During floor consideration of H.R. 3340, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, urged rejection of the bill, which would undermine the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) by subjecting their funding to Congressional appropriations and interfering with their research.
The OFR and the FSOC are funded by fees on the largest financial institutions, similar to how the banking regulators set and fund their budgets. “Maintaining a funding source independent of political interference allows FSOC and the OFR to function at full capacity and focus on threats to financial stability,” the White House wrote in a statementstrongly opposing the bill.
Waters said that if enacted, H.R. 3340 “will have serious, adverse effects on financial stability in the U.S.”
The full text of the remarks, as prepared for delivery, is as follows:
I rise today in opposition to H.R. 3340, which would impede the important work of the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) by subjecting their funding to the Congressional appropriations process. The bill would also hamstring the OFR’s ability to conduct impartial research by requiring the Office to solicit public comment before issuing any report, rule or regulation.
These changes will have serious, adverse effects on financial stability in the U.S.
The Dodd-Frank Wall Street Reform Act created FSOC to oversee and prevent threats to our financial markets. And the OFR was established to support FSOC’s critical work with analytical research. Dodd-Frank specifically empowered both agencies with independent budgets – the same way our other banking regulators like the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation operate. The FSOC and OFR are funded outside of appropriations through fees on large financial institutions. They were meant to be funded by the institutions they oversee and be shielded from Congressional politics.
Republicans say they want “accountability” by overseeing regulators’ budgets -- but what they really want is control so that they can eliminate funding for these agencies altogether. This bill would prevent efforts to properly mitigate systemic risk, to the detriment of the entire economy. And, in this Congress, it would subject the agencies to the uncertainty caused by the dysfunctional, failed Republican budget process.
All we have to do is look at the struggles facing the Securities and Exchange Commission and the Commodity Futures Trading Commission. They continue to be underfunded despite dramatic changes in the markets. It is a struggle every year to secure adequate resources to supervise complex institutions, to the benefit of industry but at dramatic cost to our economy.
Understandably, the administration opposes this bill and the President’s senior advisers would recommend a veto. The administration specifically says that “subjecting these bodies to Congressional appropriations would hinder their independence and could limit their ability to monitor and address threats to financial stability.”
In addition, this bill would interfere with OFR’s work. Republicans also say they want “transparency” and “cost-benefit analysis” with regard to OFR’s activities. But what they really want is to give industry a leg up on our regulators. In addition, by requiring the OFR to tell the industry what it is studying, the bill would corrupt OFR’s findings and could have a chilling effect on its important work. For similar reasons, I also will be urging my colleagues to oppose an amendment we will consider later today by Mr. Royce that requires detailed disclosure of the OFR’s research agenda and practices. This is not the norm of any other research organization and would severely limit OFR’s ability to conduct rigorous, impartial analysis.
Our regulators need to act with certainty, impartiality and sufficient resources to conduct robust oversight of our financial markets so that we can properly detect and deter systemic risk. Unfortunately, this bill would be a step back in that effort, not forward. And it is further evidence that Republicans seek to dismantle Dodd-Frank and the improvements we have made in our financial markets one bill at a time.
I strongly urge my colleagues to oppose H.R. 3340. I reserve the balance of my time.