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Wall Street Eyes Dodd-Frank Changes in Spending Bill

House draft legislation would undercut financial regulatory law

Richard Cordray serves as the director of the Consumer Financial Protection Bureau, a position a House spending bill aims to eliminate. (Tom Williams/CQ Roll Call file photo)
Richard Cordray serves as the director of the Consumer Financial Protection Bureau, a position a House spending bill aims to eliminate. (Tom Williams/CQ Roll Call file photo)

A spending bill that funds watchdog agencies overseeing Wall Street will offer lawmakers one of their last opportunities to undercut President Barack Obama’s signature financial overhaul before the November elections.  

Financial interests are pushing for big changes, championed mostly by Republicans, to the Consumer Financial Protection Bureau in the $21.7 billion House Financial Services draft appropriations bill . The debate will also give Democrats a chance to rail against big financial firms and reinforce a popular campaign trail refrain.

Partisan gridlock is likely to thwart any substantive changes to the 2010 Dodd-Frank financial law, but messaging amendments from both sides should grab the spotlight if the full House Appropriations Committee takes up the bill after the Memorial Day recess.

In addition to the CFPB, which was authorized by Dodd-Frank, financial industry lobbyists say they’re pushing for changes to insurance regulations as well as to the Financial Stability Oversight Council, which monitors the stability of the financial system.  

“This particular bill is a magnet for Wall Street’s lobbyists and Wall Street’s allies,” said Dennis Kelleher, president and CEO of Better Markets and a proponent of Dodd-Frank.  


On Fifth Anniversary, Dodd-Frank Financial Regulations Appear to Be Here to Stay


The draft bill approved by the House Appropriations Financial Services Subcommittee on Wednesday included a provision that would change the CFPB from a director-led agency to a bipartisan commission, as well as language that would make funding for the bureau subject to the annual appropriations process. Both measures largely pit supportive Republicans against Democrats.  

Richard Hunt, president and CEO of the Consumer Bankers Association, said Democrats should find such changes palatable with the possibility of presumptive GOP nominee Donald Trump winning the presidency.  

CFPB Director Richard Cordray’s term expires in 2018, when the next president could install someone hostile to financial regulations, Hunt said.  

“We have never called for the end of the CFPB; we have only called for a bipartisan commission,” said Hunt, a former aide to ex-Louisiana GOP Rep. Jim McCrery. “I bet a lot of Democrats change their minds after Trump wins.”  


GOP Raises Heat on CFPB’s Cordray


Still, Hunt said, making any changes to Dodd-Frank would be “much harder” because of the political rhetoric in the run-up to the elections.  

Better Markets’ Kelleher opposes any revisions to the CFPB’s structure regardless of who occupies the White House next year. “Wall Street is trying to gut and neuter the CFPB with these changes,” he said.  

Financial lobbyists said such proposals, especially the one that would convert the CFPB into a commission, should be taken seriously.  

“I would hope it would offer an opportunity, particularly given the fact, as you look at the presidential race, there’s uncertainty,” said Brad Thaler, vice president of legislative affairs at the National Association of Federal Credit Unions.  


Chances of Changing Dodd-Frank Appear to Rest With Handful of Moderate Democrats


Banking lobbyists say that getting any of the Dodd-Frank provisions included in the financial services bill would help make the argument for including the items in a year-end stopgap package to keep the government running past the elections.  

The_Financial_Sector's_Lobbying_Tab_Amount_in_Millions_chartbuilder “Appropriations bills are one of the few things, whether individually or rolled into a package, that’ll be passed this year,” Thaler noted.  

The incendiary nature of the Dodd-Frank provisions has been one of the reasons the financial services spending bill hasn’t passed the full House since 2009. Dodd-Frank was enacted in 2010.  


Consumer Bureau Gets a Leader, and Dodd-Frank Gets an Enforcer


Wall Street interests scored a change to a swaps provision in the financial law in the 2014 “cromnibus” spending package (PL 113-235 ), even as Massachusetts Sen. Elizabeth Warren  was leading a public fight against it.  

Wall Street and its regulators will face scrutiny beyond Capitol Hill this summer and fall as the government appeals a decision by a federal judge to remove America’s biggest insurance company, MetLife, from Dodd-Frank’s “too big to fail” list. In 2014, MetLife was designated a “systemically important financial institution” and the Federal Reserve began regulating it along with other big non-banks Prudential Financial, GE Capital and AIG. Briefs will begin to be filed in the case by mid-June and oral arguments could start in late October.

Since Dodd-Frank’s passage, the financial sector has spent just shy of $500 million annually on federal lobbying, according to congressional disclosures tabulated by the nonpartisan Center for Responsive Politics. The sector’s campaign donations have tilted consistently to Republicans since the 2010 cycle, the center’s data shows.


New Group for Lobbyists Moves to Fill Void


By contrast, in the 2008 cycle, the financial sector gave more in campaign cash to Democratic congressional candidates, according to the center.  

“Wall Street made a conscious strategy to politicize financial reform and moved virtually all their money to Republicans, particularly those who are committed to killing financial reform,” Kelleher said. “Is financial reform going to be a campaign issue? You bet.”  

Doug Sword contributed to this report .  

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