When it comes to goosing the lagging economy, the White House has largely focused in recent months on executive branch actions—something they dub the “we can’t wait” campaign. The motivation is obvious: with Republicans controlling the House of Representatives and able to wield a filibuster in the Senate, it’s really all the administration can do. It has implemented policy changes, like allowing underwater homeowners to refinance at current rates, and also taken steps to increase regulation of dangerous Wall Street practices—see, for example, Obama’s recess appointment of Richard Cordray to head the Consumer Financial Protection Bureau.
Republicans in Congress, however, are not going to stay on the sidelines. In particular, the House Financial Services Committee has taken aggressive steps in the past two weeks to both weaken enforcement of Wall Street and slow down federal actions to decrease unemployment.
A popular way to stop regulation already on the books is to underfund the enforcement agencies—the big Republican push to “reform” the CFPB included a proposal to let Congress set the agency’s funding levels. Having failed in that effort, the GOP is seeking to maintain completely inadequate funding for the Securities and Exchange Commission.
Yesterday, SEC chairman Mary Schapiro begged Congress to increase the agency’s funding, arguing that “the rapidly expanding size and complexity of the markets presents enormous oversight challenges.” Representative Barney Frank, ranking member of the House Financial Services Committee, offered a bill to provide that funding—and Republicans voted lockstep to trash it.
Republicans on the committee offered the perverse argument that since the SEC has repeatedly suffered oversight breakdowns in the past, it’s not entitled to additional funding. Representative Jo Ann Emerson, a Missouri Republican and member of the House Appropriations Committee, echoed this argument in the hearing with Schapiro yesterday:
“I think this body is reticent to throw more money at the SEC until ya’ll have proven that you have addressed the structural problems from within…in a comprehensive way,” [Emerson said]. “Since 2001, SEC’s budget has increased over 200 percent. Despite this tremendous growth in resources over the past decade, the SEC failed to detect Ponzi schemes such as Madoff and Stanford, the U.S. financial system nearly collapsed, and judges continue to question SEC settlements and regulations.”
Further starving a regulatory agency that’s already clearly unable to handle its massive mission is not a terribly convincing argument—one would have to truly believe the SEC is completely capable of policing Wall Street but simply suffering from “structural problems,” as Emerson asserts. (To give a sense of the very real funding problems, JPMorgan Chase—only one of the 35,000 entities the SEC is tasked with regulating—spends four times the entire SEC budget on information technology alone). But it’s the only argument Republicans have—the SEC is funded entirely by fees from the financial industry, so Republicans can’t carp about the deficit.
Republicans on the House Financial Services Committee have been making mischief in other areas, too. Representative Kevin Brady, a Texas Republican, introduced a bill this week to strip the Federal Reserve of its legal mandate to seek maximum employment. The Humphrey-Hawkins Full Employment Act of 1978 gives the Fed a dual mandate of seeking low inflation and high employment, but Republicans would prefer it only focus on combating inflation—which, not incidentally, is something the very wealthy are typically quite concerned with, as it can devalue their large piles of assets or investments.
Sensing a political opportunity, all twenty-seven Democrats on the panel have signed a letter asking the chairman, Representative Spencer Bachus, to hold a full hearing on the matter of keeping the Federal Reserve from addressing unemployment. They stress they do not support the bill, but coyly say that “the country would benefit from having a full discussion of this issue, now that it has been raised by various influential figures, including you.”
Perhaps this turnabout will work, and in any case, it’s doubtful the Senate would pass this measure and all but certain Obama would veto it. But it’s clear that Republicans are not content to sit idly by while the White House attempts to wield the power it can without Congress—and these are all ideas that will be sitting in the hopper should Republicans take the Senate and White House back this fall.
