WASHINGTON (Reuters) - Democrats will resist Republican attempts to weaken Dodd-Frank financial reforms through underfunding key regulatory agencies, Representative Barney Frank told Reuters on Thursday.
“We intend to make a fight,” Frank, senior Democrat on the House Financial Services Committee, said in an interview as House Republicans agreed to pursue deep government spending cuts in the name of combating the soaring budget deficit, and pushed for a review of regulations.
“I‘m worried that (committee Republicans) are complicit with the appropriators in underfunding the SEC and the CFTC. That’s the biggest problem,” Frank said.
The Securities and Exchange Commission and the Commodity Futures Trading Commission must implement and enforce scores of new rules under last year’s Dodd-Frank legislation, approved in the wake of the 2007-2009 financial crisis.
Republicans opposed Dodd-Frank last year and have acknowledged they hope to weaken it by using their new-found power over the government’s purse strings.
Discussion on the House floor late on Thursday about a regulatory review proposal from Republicans triggered a debate about funding for the SEC and CFTC.
“We have 3,800 people over at the SEC ... Everybody is going to have to take a little bit of the cuts in order to get the budget back into balance,” said Republican Representative Ed Royce.
Gary Miller, another Republican, called Dodd-Frank “scary” because of the hundreds of new rules it mandates.
Miller criticized the SEC for failing to act on early warnings about the Bernie Madoff scandal and called for holding the agency accountable for its failures.
Democratic Representative Al Green replied: “Yes, 3,800 employees, but they are overworked and overwhelmed ... The SEC needs help, not hurt.”
Mel Watt, another Democrat, said: “I don’t know how you hold the SEC accountable by decreasing their authority to regulate the financial industry and decreasing their budget ... That does not compute.”
Two key components of Dodd-Frank call for new rules on the previously unregulated off-exchange derivatives market, and setting up a Consumer Financial Protection Bureau (CFPB) to shield consumers from predatory and abusive practices.
“I have some concern that they will try to undermine ... derivatives and the consumer protection,” Frank added.
“I don’t think there’s much they can do about consumer protection. But they can underfund the CFTC and the SEC. Those are the two areas where I think they are most eager to weaken things and I think inaccurately.”
Asked whether Democrats would be able to protect proposed budget increases for the SEC and CFTC, Frank said:
“I don’t know about the funding. Obviously there is this overall concern about the deficit, but the amounts (for the agencies) are so small, I just don’t know.”
Republican Representative Randy Neugebauer said on Thursday he has introduced a bill to move the CFPB out of the Federal Reserve, where Dodd-Frank put it to bolster its independence, and into the Treasury Department.
Such a move would reduce the bureau’s autonomy by putting its budget through the congressional appropriation process.
Top regulators, including the heads of the SEC and CFTC, will testify on Dodd-Frank on February 17 before the Senate Banking Committee, which is still under Democratic control.
Additional reporting by Dave Clarke; Editing by Steve Orlofsky