My Competitive Enterprise Institute colleagues and I have made the case for members of Congress to use the omnibus spending bill as an exercise of its “power of the purse” to hold the Obama administration accountable. Unfortunately, negotiators in Congressional leadership opened that purse way too soon and way too wide to give President Obama nearly everything in terms of the spending he wanted while inexplicably leaving out regulatory relief measures that members of both parties were clamoring for in the thousand-plus page omnibus bill (read it here) to be voted on later this week.
While there were a couple good measures like lifting the oil export ban and repealing the expensive and confusing country-of origin-labeling mandate for beef and pork (see this post from CEI Adjunct Scholar Fran Smith about the retaliatory tariffs the U.S. faced if this mandate was not repealed), negotiators left out even modest bipartisan deregulatory measures that would have lessened the burden of Dodd-Frank on community banks and credit unions and frozen the Department of Labor’s draconian “fiduciary rule” that attracted criticism from 96 House Democrats for the devastating consequences the proposed rule would have on savers. As I have written, the “fiduciary rule” may even silence financial commentators such as Dave Ramsey.
On the good side, there was at least a measure of “sunshine” that will bring the Consumer Financial Protection Bureau in line with nearly all other government entities as far as a transparency. As my Competitive Enterprise Institute colleague Iain Murray and I have noted previously, the CFPB routinely closes large meetings with advocacy groups, claiming an exemption from the Federal Advisory Committee Act (FACA) because the bureau is technically part of the Federal Reserve. But section 704 on page 1970 of the omnibus text (if you’re doing some “light reading” or the monstrously long document) adopts legislation from transparency hero Rep. Sean Duffy (R-Wisc.) and explicitly states that FACA “shall apply to each advisory committee of the bureau and each subcommittee of an advisory committee.”
Unfortunately, one rider made it in that, despite having a Republican champion, would serve to entrench the Obama administration status quo, rather than check it. The misnamed Jumpstart GSE Reform Act, co-sponsored by Sens. Bob Corker (R-Tenn.) and Elizabeth Warren (D-Mass.), would frustrate true reform of GSEs by giving a minority in Congress effective veto power over any efforts to privatize them.
On its face, the bill prevents the government from selling any stake in Fannie Mae or Freddie Mac, the two government-sponsored housing enterprises the Treasury took 79.9 percent of as part of its 2008 bailout, before an affirmative vote of Congress until the end of 2017. On its face, this may measure may seem innocuous and unnecessary. After all, the Obama administration certainly is in no rush to privatize Fannie and Freddie.
But of course, there will be a new administration in 2017. The new President might want to sell all or part of the government’s stake as part of reform (which includes also getting rid of the GSE’s lines of credit with the Treasury, often referred to as “implicit guarantees”). But with the filibuster and other procedures, a small minority in Congress could prevent this from happening.
Think about it this way. What if Congress had to vote on selling the government’s stake in every company bailed out through TARP in 2008? The government would likely still be holding a lot of banks, and taxpayers would be even further on the hook.
On top of this, the Corker-Warren provision, does nothing about reining in the Obama Treasury Department’s Third Amendment sweep of GSE profits. As I have written, the Third Amendment is not only a violation the GSEs’ private shareholders’ property rights, it also leaves the GSEs with very little capital. Given Freddie Mac’s recent losses, this heightens greatly to risk of another taxpayer bailout of the GSEs.
At the very least, Congress must now pass H.R. 1673, the “Enterprise Secondary Reserve Taxpayer Protection and Government Accountability Act of 2015,” introduced by Rep. Marsha Blackburn (R-Tenn.). The bill creates a reserve fund using profits generated by the GSEs. If Fannie and Freddie experienced significant losses, they could draw down this reserve fund, rather than going back to the Treasury—i.e., taxpayers—for additional resources. Leaders of 15 conservative and free-market groups signed a letter coordinated by CEI and the National Taxpayers Union urging Congress to pass this bill on its own or as part of broader legislation. It’s not too late to either get rid of this provision and/or add in Blackburn’s bill.
My CEI colleagues and I will continue to urge Congress to exercise its power of the purse to the maximum extent in spending bills to free consumers, investors and entrepreneurs from the Ten Thousand Commandments that curtail their choices and opportunities.