Monday, July 18, 2011

President Would Veto Spending Bill Undermining SEC’s Ability to Implement Dodd-Frank Provisions

The Obama Administration has indicated that the President would veto any spending legislation that would undermine implementation of the Dodd-Frank Act through funding limits or other restrictions. Such a bill appears to be the Financial Services and General Government Appropriations Act, HR 2434, which was recently approved by the House Appropriations Committee. In a statement released through OMB, the Administration strongly opposed a number of provisions in HR 2434.

The Administration opposes the measure’s funding level for the SEC, which it believes would compromise the Commission's current market oversight and enforcement activities, including policing the securities and derivatives marketplace. The proposed funding would also undermine the SEC's ability to effectively carry out responsibilities authorized under the Dodd-Frank Act; and severely compromise critical information technology investments that would prevent fraudulent investment schemes. Limiting the SEC's expenditures does not result in any budgetary savings, noted the OMB statement, since the SEC is fully funded by fees on financial transactions and the overall fee level is by statute set to equal the spending level appropriated. In addition, section 623 of the Act, which bars the SEC from using amounts in its Reserve Fund as authorized by the Dodd-Frank Act, is problematic because it would significantly undermine the SEC's ability to fund long-term projects that improve the Commission's efficiency and effectiveness.

The Administration also opposes the alteration of Bureau of Consumer Financial Protection Bureau’s mandatory funding structure as authorized by the Dodd-Frank Act, which would compromise the Bureau's independence, as well as limitations on the Bureau's expenditures to levels that would severely undercut the agency's statutory responsibility to oversee consumer financial products such as mortgages and credit cards. Not only would the measure’s funding limitation severely curtail hiring and start-up investments that are already underway, noted the Administration, but it would also impede supervision, limit the Bureau's consumer response services, prevent the ramping up of citizen financial literacy improvements, and delay the implementation of financial protection programs for older Americans.

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