House Financial Services Committee Issues Report on Dodd-Frank Wall Street Reform, Consumer Protection Act
Excerpts of the report follow:
PURPOSE AND SUMMARY
H.R. 4894 repeals Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act to ensure that taxpayers will not pay the costs of bailing out large financial institutions or their creditors. Title II establishes an
BACKGROUND AND NEED FOR LEGISLATION
The Treasury Secretary must subject a financial company to resolution under Title II after receiving a written recommendation from the
[Footnote 1: Id. at 203(b)(1)-(7), 12 U.S.C. Sec. 5383(b)(1)-(7). For broker-dealers, the
The Dodd-Frank Act requires that 'Orderly Liquidation Authority' resolutions carried out under Title II meet particular requirements. The
[Footnote 2: Id. at Sec. 206, 12 U.S.C. 5386.]
A resolution under Title II is funded through the 'Orderly Liquidation Fund,' which is capitalized using the proceeds of obligations issued by the
[Footnote 3: Id. at Sec. 210(n), 12 U.S.C. 5390(n).]
[Footnote 4: Id. at Sec. 204(d), 12 U.S.C. 5384(d).]
[Footnote 5: Id. at Sec. 210(b)(4), 12 U.S.C. 5390(b)(4).]
The 'Orderly Liquidation Fund' can also be used to provide operating funds to a bridge financial company established by the
[Footnote 6: Id. at Sec. 210(h)(2)(G)(iv), (h)(9), 12 U.S.C. 5390(h)(2)(G)(iv), (h)(9).]
[Footnote 7: Id. at Sec. 210(o), 12 U.S.C. 5390(o). If assessments on claimants receiving more than the liquidation value of their claims are insufficient to repay the obligations issued by the
[Footnote 8: Id. at Sec. 210(s), 12 U.S.C. 5390(s).]
Proponents of the 'Orderly Liquidation Authority' claim that taxpayers will be paid back, noting that the Dodd-Frank Act provides that 'taxpayers shall bear no losses from the exercise of any authority under' Title II. 9 [Footnote] However, taxpayers remain at risk of suffering losses. First, the government has not successfully administered other 'insurance' programs that are required to be self-sustaining, and it is unlikely that the
[Footnote 9: Dodd-Frank Wall Street Reform and Consumer Protection Act Sec. 214(c), 12 U.S.C. 5394 (2012).]
[Footnote 10: Who is Too Big to Fail: Does Title II of the Dodd-Frank Act Enshrine Taxpayer-Funded Bailouts? Hearing Before the Subcomm. on Oversight and Investigations of the H. Comm. on Fin. Services, 113th Cong. (2013), at 17 (statement of
[Footnote 11: Oversight Subcomm. Hearing on the OLA, at 7 (statement of David Skeel); Id. at 20 (statement of
[Footnote 12: Examining how the Dodd-Frank Act could Result in More Taxpayer-Funded Bailouts: Hearing Before the H. Comm. on Fin. Services, 113th Cong. (2013), at 12 (statement of
HEARINGS
COMMITTEE CONSIDERATION
COMMITTEE VOTES
Clause 3(b) of rule XIII of the Rules of the
Insert offset folio 6 here HR574.001
COMMITTEE OVERSIGHT FINDINGS
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
PERFORMANCE GOALS AND OBJECTIVES
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES
In compliance with clause 3(c)(2) of rule XIII of the Rules of the
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared by the Director of the
CONGRESSIONAL BUDGET OFFICE ESTIMATES
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
U.S.
Hon.
Chairman,
DEAR MR. CHAIRMAN: The
If you wish further details on this estimate, we will be pleased to provide them. The CBO staff contact is
Sincerely,
Enclosure.
H.R. 4894--A bill to repeal title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act
Summary: H.R. 4894 would repeal title II of the Dodd-Frank Wall Street Reform Act of 2010. That title provides the
Enacting H.R. 4894 would eliminate the
CBO estimates that ending the
Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. CBO estimates that implementing H.R. 4894 would have no significant effect on spending subject to appropriation.
CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits by more than
H.R. 4894 contains no intergovernmental mandates as defined in the Unfunded Mandates Reform Act (UMRA) and would not affect the budgets of state, local, or tribal governments.
CBO expects that the
Estimated cost to the Federal Government: The estimated budgetary effect of H.R. 4894 is shown in the following table. The costs of this legislation fall within budget function 370 (commerce and housing credit).
To view the table, click this link: http://thomas.loc.gov/cgi-bin/cpquery/37?&sid=cp114VPC2n&refer=&r_n=hr574p1.114&db_id=114&item=37&&sid=cp114VPC2n&r_n=hr574p1.114&hd_count=50&item=37&&sel=TOC_10168&.
Basis of estimate: For this estimate, CBO assumes that the legislation will be enacted near the beginning of fiscal year 2017. CBO estimates that enacting H.R. 4894 would reduce the deficit by
Orderly liquidation fund
Current law provides the
If the necessary conditions are met, the
Although the probability that the
Deposit insurance
Repealing the
CBO expects that if a systemically important financial firm were to fail, some federally insured depository institutions would be among its creditors, increasing the probability of losses to the DIF. CBO also expects that the losses of those creditors would be larger under a bankruptcy proceeding than a resolution under current law using the OLF because the timing and mechanisms of the bankruptcy process would probably place additional stress on the firm's creditors and other financial institutions.
The potential effects on the DIF from enacting this legislation would depend on many legal, financial, and economic factors that are difficult to quantify. For example the risk to the DIF of additional bank failures would depend on the exposure of insured depository institutions to higher costs because of the bankruptcy proceedings undertaken to resolve systemically important firms, and whether such banks could remain financially solvent after absorbing such costs. To estimate the additional cost to the DIF under H.R. 4894, CBO considered the estimated cash flows of the OLF and also considered the types of interrelated financial institutions (knowns as counterparties) that would accrue losses because only insured depository institutions that fail would be resolved by the DIF.
CBO's baseline estimate of the net budgetary effects of the DIF is an average reduction in the deficit of about
CBO estimates that under H.R. 4894, the value of assets of failed institutions requiring resolution by the
Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending or revenues. The net changes in outlays and revenues that are subject to those pay-as-you-go procedures are shown in the following table.
CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 4894, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON
To view the table, click this link: http://thomas.loc.gov/cgi-bin/cpquery/37?&sid=cp114VPC2n&refer=&r_n=hr574p1.114&db_id=114&item=37&&sid=cp114VPC2n&r_n=hr574p1.114&hd_count=50&item=37&&sel=TOC_10168&.
Increase in long term direct spending and deficits: CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027.
Estimated impact on state, local, and tribal governments: H.R. 4894 contains no intergovernmental mandates as defined in UMRA and would not affect the budgets of state, local, or tribal governments.
Estimated impact on the private sector: CBO expects that the
Estimate prepared by: Federal costs:
Estimate approved by:
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the
ADVISORY COMMITTEE STATEMENT
No advisory committees within the meaning of section 5(b) of the Federal Advisory Committee Act were created by this legislation.
APPLICABILITY TO LEGISLATIVE BRANCH
The Committee finds that the legislation does not relate to the terms and conditions of employment or access to public services or accommodations within the meaning of the section 102(b)(3) of the Congressional Accountability Act.
EARMARK IDENTIFICATION
H.R. 4894 does not contain any congressional earmarks, limited tax benefits, or limited tariff benefits as defined in clause 9 of rule XXI.
DUPLICATION OF FEDERAL PROGRAMS
Pursuant to section 3(g) of
DISCLOSURE OF DIRECTED RULEMAKING
Pursuant to section 3(i) of
SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION
Section 1. Repeal of liquidation authority.
This Section repeals Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and provides that any Federal law amended by such title shall, on and after H.R. 4894's effective date, be effective as if Title II had not been enacted.
CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED
In compliance with clause 3(e) of rule XIII of the Rules of the
The full text of the report is found at: http://thomas.loc.gov/cgi-bin/cpquery/37?cp114:temp/~cp114VPC2n&sid=cp114VPC2n&item=37&sel=TOCLIST&l_f=551&l_file=list/cp114ch.lst&l_b=501&l_file=list/cp114ch.lst&report=hr574p1.114&hd_count=50&&&l_t=659&&&.
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