House committee moves to cut funding for financial regulators

WASHINGTON (Reuters) - A bill to slash funding for the U.S. Securities and Exchange Commission, Internal Revenue Service and other financial regulators passed a key committee in the U.S. House of Representatives on Thursday after a long partisan fight.

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

The expansive legislation would also place a halt on the payday lending restrictions that the Consumer Financial Protection Bureau recently proposed.

The Appropriations Committee voted 30-17 to approve the bill allocating funds for financial services and general government, which now goes to the full House.

One of the committee’s senior Democrats, Jose Serrano of New York, warned that the “bill in its current form will be vetoed.”

The Senate must still pass accompanying legislation. After that, both chambers will reconcile their bills into a single piece for President Barack Obama to sign or veto. Congress has tangled over budget laws for years, and federal agencies frequently rely on temporary continuing resolutions for funding.

Republicans cast the bill as a way to streamline agencies and hold them accountable for spending decisions, while saving taxpayer money.

Democrats attacked what they called “riders” to the bill, such as a measure to stop the Federal Communications Commission’s net neutrality rule and one to prevent corporations from being required to disclose political donations. They also said cuts to the SEC would hobble the agency in carrying out its duties and implementing the 2010 Dodd-Frank Wall Street reform law.

Earlier this month the CFPB, charged with shielding consumers from financial fraud, proposed rules to limit short-term borrowings known as “payday” loans, which can charge interest as high as 390 percent.

Critics say the proposal will cut off credit to poor people who may need small loans during emergencies. Representative Steven Palazzo, a Mississippi Republican, proposed an amendment on Thursday to delay implementing the rules until the bureau reports to Congress on their possible effects, saying he was concerned they could force people to turn to loan sharks.

Democratic National Committee Chair Debbie Wasserman Schultz had been one of the few members of her party to oppose the rules, and had sponsored a bill to delay CFPB rules for two years.

Wasserman Schultz, who is also a U.S. representative from Florida, reversed her position in the last week. She told the hearing on Thursday the proposal is “inarguably a step in the right direction,” adding, “I stand with the CFPB in its efforts to protect Americans from predatory lending.”

Reporting by Lisa Lambert; Editing by Matthew Lewis