White House budget director Shaun Donovan harshly criticized a Republican bill to fund government financial agencies Wednesday, saying that it would cripple the government's ability to regulate markets and would undo President Obama's financial reform law.
In particular, Donovan took aim at the inclusion in the appropriations bill of a banking reform bill authored by Senate Banking Committee Chairman Richard Shelby, R-Ala., that would touch on almost every aspect of the financial system.
"Attempting a wholesale rollback of Wall Street reform by way of ideological riders on an appropriations bill is a cynical abuse of the government's funding process," Donovan wrote in a letter to Senate Appropriations Committee Chairman Thad Cochran, R-Miss.
The financial services appropriations bill, passed by the committee in July, was the last of 12 appropriations bills that are supposed to be passed by Congress each year as part of the normal budget process.
With the bill, Republicans would set spending $4 billion below the level requested by President Obama for agencies such as the IRS, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
Donovan wrote that the IRS funding levels would undermine "the fairness and integrity of the tax system in ways that would increase burdens on taxpayers, including by increasing the deficit." The bill also "underfunds reforms and safeguards for consumers, investor and taxpayers, jeopardizing essential regulatory independence and threatening the financial security of the middle class by encouraging the same kind of risky, irresponsible behavior that led to the Great Recession."
The White House has said that it will recommend a veto for any spending bills that lock in Republicans' budget plans, which maintain caps on government spending. Instead, the administration favors negotiations to raise spending caps on defense and non-defense spending by cutting spending and raising taxes in subsequent years.
Senate Majority Leader Mitch McConnell indicated this week that he would look to begin talks with Democrats in the fall. The federal fiscal year ends Sept. 30.
Shelby's bill would lift regulations on community banks, overhaul the Federal Reserve, reverse some of the new rules on mortgages, exempt mid-sized banks from the strict oversight given to megabanks, change the terms of the government's management of the bailed-out mortgage giants Fannie Mae and Freddie Mac and do much more.
The reform package cleared the Banking Committee earlier in the summer, but on a party-line vote that suggested it could not clear the Senate. Shelby has said that he's in talks with Democrats to find a way forward.