The House approved a spending bill Thursday that would change the structure of the Consumer Financial Protection Bureau and take away the Financial Stability Oversight Council's power to designate nonbanks as systemically important.
The bill earmarks $21.7 billion in funding for the Treasury Department and the Securities and Exchange Commission, which represents a $1.5 billion decline from 2016 levels and $2.7 billion less than what President Obama requested.
However, language in the bill that would create a five-person commission to oversee the CFPB and subject the bureau to the appropriations process may be of more interest to bankers.
"The creation of a five-person, bipartisan board at the CFPB will preserve it as a stable, strong and effective regulator, regardless of a President Trump or Clinton," said Consumer Bankers Association President Richard Hunt in a statement following the bill's approval. He also applauded provisions in the bill that would require the CFPB to revisit recent rulemaking proposals.
"CBA also appreciates the House requiring the bureau to take a second look at its arbitration and small-dollar lending proposals before consumers are potentially harmed," said Hunt.
But Rep. Maxine Waters, D-Calif., the top Democrat on the House Financial Services Committee, said the bill undermines the Dodd-Frank Act and would hurt consumers.
The bill "so gravely underfunds and undermines Wall Street Reform that it is fair to say it would expose us to another financial crisis," said Waters in opening remarks on the House floor. She added that the CFPB policy riders "stab at the heart" of the bureau tasked with protecting consumers.
Waters also objected to a provision in the bill that would prevent the FSOC from subjecting nonbanks to heightened prudential supervision and capital requirements, arguing that the FSOC "keeps our financial system safe by looking out for systemic risk throughout the system and closing the gaps in our once-fractured regulatory framework."
But Rep. Scott Garrett, R-N.J., said the changes to FSOC's authority would amend bad policy.
"As the FSOC designates both banks and nonbanks as 'systemically important,' it essentially puts the government’s stamp of approval for taxpayer bailouts into federal law," said Garrett.
While the Financial Services and General Government appropriations bill was approved by the House, the changes to the CFPB and FSOC are a longshot to become law this year. Not only would the Obama administration likely oppose them, but the Senate's pending financial services appropriations bill does not include the same policy riders. That bill has not been considered by the full Senate yet.