Parliamentarian knocks CFPB funding cut out of megabill

WASHINGTON — The Senate parliamentarian has decided to disallow the slash to Consumer Financial Protection Bureau funding in President Donald Trump’s so-called “big, beautiful bill” to reform government taxes and spending. 

Senate Parliamentarian Elizabeth MacDonough has advised that several provisions in Senate Banking Committee Republicans’ spending legislation would violate the Byrd rule, which bars “extraneous” items from being included in reconciliation bills. 

The parliamentarian’s decision means that Republicans would need to overcome the point of order against the bill with 60 votes to move forward with the contested provisions. The party currently holds a 53-47 seat majority and is unlikely to win any Democratic votes for the highly partisan measure. 

The decision effectively sends Tim Scott, the chairman of the Senate Banking Committee, back to the drawing board on his portion of the spending bill and represents a major blow to the South Carolina Republican’s agenda for the committee. 

“I remain committed to advancing legislation that cuts waste and duplication in our federal government and saves taxpayer dollars,” Scott, R-S.C., said in a statement. “As it stands now, the Banking Committee’s reconciliation provisions will delay the implementation of Section 1071 of Dodd-Frank, which reduces CFPB spending and protects the privacy and data of small business owners; rescind unused funds earmarked for green initiatives to give HUD discretion in funding critical housing programs; and save taxpayer dollars by eliminating an unnecessary reserve fund at the SEC. My colleagues and I remain committed to cutting wasteful spending at the CFPB and will continue working with the Senate parliamentarian on the Committee’s provisions.” 

The Senate Banking bill would have drastically changed the funding structure of the CFPB by removing its ability to be funded through disbursements from the Federal Reserve. The bureau would instead be subject to regular congressional appropriations, a longtime goal of the bureau’s opponents. The bill would have also cut the pay of Federal Reserve staffers, which the Senate parliamentarian ruled against. 

It would also have eliminated the Public Company Accounting Oversight Board and the Office of Financial Research; the former was established by Sarbanes-Oxley in the wake of the Enron accounting scandal and the latter was established by Dodd-Frank in 2010 as a research arm of the Financial Stability Oversight Council. The Senate Parliamentarian struck down both of those provisions as Byrd rule violations as well. 

A group of prominent economists and financial experts — among them former Fed Chairs Janet Yellen and Ben Bernanke — sent a letter earlier this week to congressional leadership warning against the elimination of the Office of Financial Research. The group said that eliminating the office would leave regulators flying blind during the next financial crisis. 

“The proposed legislation does more than end the OFR. It would also cripple FSOC, because FSOC relies heavily on the OFR for data and analysis and because the provision permanently caps FSOC’s budget at what will inevitably be much lower spending levels,” the letter said. “Eliminating the OFR and crippling FSOC would not reduce the federal budget deficit but would undermine America’s capacity to maintain a stable financial system.” 

The Senate Banking bill was Republicans’ latest attempt to restructure the funding of the CFPB. Democratic lawmakers, particularly Senate Banking Committee ranking member Elizabeth Warren, D-Mass., who helped set up the bureau as an academic before she was elected to the Senate, have said they will fight against any attempts to dismantle the CFPB. 

The parliamentarian allowed some of the GOP’s provisions, including the slashing of all unobligated funds for a green housing program and the delay of Dodd-Frank Section 1071, the small-business lending data-collection rule. A section that would sweep all unused money from and eliminate a fund at the Securities and Exchange Commission that allowed the agency to spend money on technology modernization was also allowed.