Most savings come from how the CFPB is funded
The Republican-led act to replace Dodd-Frank is estimated to reduce federal deficits by $24.1 billion over the 2017 to 2027 period, according to a new report from the Congressional Budget Office, a nonpartisan analysis for the U.S. Congress.
As ordered reported by the House Committee on Financial Services on May 4, the CBO report found that under the Financial CHOICE Act, H.R. 10, direct spending would be reduced by $30.1 billion, and revenues would be reduced by $5.9 billion.
The CBO report explained that H.R. 10 would repeal the Federal Deposit Insurance Corporation’s authority to use the Orderly Liquidation Fund and would allow financial institutions, under certain circumstances, to be exempt from a variety of regulations. The bill would also change how the operations of the National Credit Union Administrationand Consumer Financial Protection Bureau are funded.
Most of the budgetary savings would come from eliminating the OLF and changing how the CFPB is funded.
While the Financial CHOICE overhauls all of Dodd-Frank, the CFPB faces some of the most drastic changes.
Here’s how the report details the financial impact to the CFPB’s funding under the CHOICE Act (Find the full report here):
Under current law, the CFPB is funded by transfers from the Federal Reserve and the agency’s spending is recorded as direct spending. Title VII would amend current law to make spending for the CFPB (renamed the Consumer Law Enforcement Agency) subject to annual appropriations. The bill would authorize the appropriation of $485 million for fiscal year 2018, an amount equal to the amount transferred from the Federal Reserve to the CFPB in 2015. CBO estimates that enacting this provision would reduce direct spending by $6.9 billion over the 2018-2027 period and cost $485 million over the 2018-2022 period, subject to appropriation of the authorized amounts. H.R. 10 would not authorize appropriations for the agency after 2018, but CBO estimates that its operations would cost about $5 billion over the 2019-2027 period, assuming appropriations were provided in those years that were equal to the amount authorized for 2018, adjusted for anticipated inflation.
While not as severe as the CFPB’s changes, the NCUA also faces changes in its funding, shown below:
Under current law, the NCUA imposes fees on all federally chartered credit unions to pay for its operations. Under H.R. 10, the NCUA would instead impose a fee on all credit unions, including those chartered by states, to offset the costs of an annual appropriation for the agency’s administrative operating costs. Under the bill, the total collections from credit unions would be higher than under current law because the bill would not reduce current assessments as much as current spending for administrative costs. By making the NCUA’s administrative costs subject to annual appropriation, this provision would, by CBO’s estimates, decrease the deficit by $2.3 billion over the 2018-2027 period, reflecting decreases in direct spending of $3.4 billion and reductions in offsetting receipts of $1.1 billion over the 2018-2027 period. Because the NCUA would collect fees to offset any spending of appropriated funds, implementing the provisions regarding the NCUA would have no net effect on spending that is subject to annual appropriations.
Overall, the CBO estimated that, over the 2017-2027 period, and assuming appropriation of the necessary amounts, implementing the bill would cost $1.8 billion.
But the report cautioned that the estimates above are subject to considerable uncertainty, in part because they depend on the probability in any year that a systemically important firm will fail.
“That probability is small under both current law and under the legislation, but it is hard to predict. Despite those and other uncertainties, CBO has endeavored to develop estimates that are in the middle of the distribution of possible outcomes,” the report stated.