GOP Uses Deficits as an Excuse To Gut Financial Regulation

Congress this week has turned its attention to an all-but-certain temporary funding agreement that will keep the federal government operating through March 18.

But even as urgent work continues on a measure that the House passed Tuesday, Republicans are using the fog of deficits as cover for an ideological campaign to neutralize new laws that improve protections for individual investors and ordinary consumers while strengthening the integrity of our economic system overall.

In the banking and investment realm, their efforts amount to what might be called "re-deregulation." They would return to the glory days of 2008, when market abuses and inadequate government oversight devastated individual and institutional savings while leaving businesses, large and small, struggling to recover from an economic collapse.

A major target is the financial reform act that became law last July. While not as tough as some reformers had hoped, the law reorganizes much of the financial regulatory structure of the federal government, aiming to simplify and streamline the process.

The law gives new responsibility to the Commodity Futures Trading Commission to regulate a class of financial products called derivatives. Used astutely, derivatives can help reduce financial risks and make possible investments that might not occur otherwise. But reckless practices in the largely unregulated $600 trillion derivatives market magnified and spread the impact of failing investments and helped put the world's financial systems at risk of collapse in 2008 and 2009.

To pay for the commission's new duties, the Obama administration has proposed increasing its budget from $169 million to $300 million.

The vast majority of the increase would be covered by user fees on transactions.

Republicans, however, want to cut the commission budget to $112 million, less than it was using to carry out fewer responsibilities. Republicans also have proposed allotting $80 million instead of $143 million for the Consumer Financial Protection Bureau, a new agency with the principal assignment of watching over the interests of ordinary consumers.

A coalition of investor and consumer groups — the Council of Institutional Investors, the Consumer Federation of America and ShareOwners.org — are protesting the Republicans' proposed funding levels for the commission, along with additional Republican cuts to the Securities and Exchange Commission.

At an agency hearing last week, CFTC commissioner Michael Dunn said that the proposed cuts would gut the agency's ability to do its job. "There would essentially be no cop on the beat," he said.

Republican budget proposals also would eliminate $3 million needed to operate a new, easily accessible database of official safety complaints received by the Consumer Product Safety Commission. The database is ready to go, having been developed on the authority of a 2008 law and tested for accuracy in advance of its planned March 11 start date. It would replace a burdensome bureaucratic process laden with obstacles, which has kept most of this information out of consumers' hands.

Driving all these efforts — in addition to industry lobbyists — is an anti-government ideology that believes financial investors and consumers should be kept ignorant and left at the mercy of market manipulators and shoddy manufacturers.

By using the deficit dodge, Republicans hope to avoid having to debate the merits of programs that, in some instances, are crucial to reducing the likelihood of another financial catastrophe. They are pursuing an irresponsible course.

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