
The United States House Financial Services Committee approved a bill proposed by the House Republicans to cut funding from the Consumer Financial Protection Bureau and to dissolve the Public Company Accounting Oversight Board into the Securities and Exchange Commission. The legislation received some backlash from Democrats along the way however, the party’s efforts were not enough.
According to the bill, the CFPB’s budget would take a big hit as well as its penalty money obtained from enforcement actions. The funds received from these enforcement actions will be used for victim compensation with the leftovers being sent to the Treasury. Specifically, the legislation will require that “if the Bureau makes payments to all of the direct victims of activities for which that civil penalty was imposed, the Bureau shall transfer all amounts that remain in the Civil Penalty Fund with respect to that civil penalty to the general fund of the Treasury.”
Essentially, the CFPB’s budget would decrease around 60% and its funding from the Federal Reserve would be capped at 5 percent of the central bank’s operating expenses under the proposal — down from the current limit of 12 percent as laid out in the Dodd-Frank Act.
Larger Effort to Cut Government Spending
The CFPB has come under a significant amount of fire since the start of the Trump administration. There have been many efforts by President Trump to dismantle the agency such as attempted mass firings, an order to suspend agency operations, and so on.
This legislation represents a broader effort by Republicans to create at least $1.5 trillion in spending cuts in order to pass a $5 trillion tax cut as part of President Trump’s policy agenda. “For too long, government spending has been on a one-way ratchet,” House Financial Services Committee Chairman French Hill, R-Ark., said at the start of Wednesday’s markup. “We are here with one purpose, to do our part to put our nation back on a responsible fiscal trajectory.”
Republicans are in support of this funding as they see it as a means towards diminishing “reckless government spending.” Meanwhile Democrats perceive the bill as hypocritical in that such substantial spending cuts themselves are “reckless.” Accordingly, many Democrats believe that the CFPB runs a profitable business, putting more money in consumer pockets than the expenses it incurs to do so.
PCAOB to be Dissolved Into the SEC
Under the proposed legislation, the PCAOB, known to oversee the audits of public companies, will merge into the SEC. This results from Republican criticism of the agency that it lacks accountability and transparency. The SEC would essentially assume the duties and responsibilities of the PCAOB.
While many are in support of such a significant move, many believe that such a move is not practical. Congresswoman Janelle Bynum cautioned against merging the PCAOB into the SEC, describing the proposal as a significant and potentially risky shift that demands closer examination. She urged Republicans to “pump the brakes” and introduced an amendment that would delay the transfer of oversight authority until the SEC can confirm that the change would not heighten investor risk.
In contrast, many believe that that such a move is crucial towards President Trump’s government spending agenda. “I appreciate my colleague’s newfound passion for fiscal discipline,” Congresswoman Ann Wagner said. “However, the committee print before us today is a result of extensive member input to deliver on the promise to rein in out-of-control spending.
Jacob Horowitz is a contributing editor at Internal Audit 360°