The historic financial reform law that President Barack Obama signed last July is more akin to an outline than a detailed regulatory mandate. It will only have teeth when numerous rules are written and oversight mechanisms are put into place. Getting the money for this work wouldn’t have been a problem if Democrats still controlled the House--but they don’t anymore.
Last week, the House Appropriations Committee rejected the Obama administration’s request for increased funding for the Securities and Exchange Commission and voted instead to freeze the agency’s budget. The vote came despite the fact that its chair, Mary Shapiro, told Congress earlier this year that the SEC needed to write 100 new rules, open five new offices, and publish 20 studies to comply with Dodd-Frank mandates. Among other things, the SEC has new authority over credit-rating agencies, derivatives, and hedge funds: the institutions and financial products that led us into the crisis. If Shapiro can’t hire the extra staff she needs, the SEC won’t be able to exercise its expanded oversight - which is exactly the goal of the budget cuts.
Republicans are also using the power of the purse to strangle the Consumer Financial Protection Bureau, an entirely new agency and one of Dodd-Frank’s most ambitious elements. The same bill that freezes SEC spending includes sharp limits on funding for the CFPB, which was expecting $550 million in fiscal year 2012 and needs a minimum of $329 million to get going. Republicans would give it $200 million. Trying to snuff out the CFPB has almost become a sport on Capitol Hill, where no fewer than five bills aimed at weakening or killing the bureau have been introduced.
A second strategy for undermining Dodd-Frank is to ensure that the new rules implementing the law are weak. Wall Street has mobilized an extraordinary lobbying push to influence the rule-writing for Dodd-Frank. In fact, this campaign is larger than the financial industry’s effort to shape the original bill. According to the Center for Responsive Politics, the agencies working to implement reform were subjected to more lobbying in the first quarter of 2011 and last quarter of 2010 than in any other period since President Obama took office.