Advocates of President Obama’s proposed crackdown on conflicts of interest in retirement planning will be watching closely to see if a rider slowing or blunting the rule is included in the government spending bill, a top priority for Republicans.
Congressional action on the rule, known as the fiduciary rule, would be a threat to the regulation going into effect during President Obama’s tenure. The Department of Labor currently is preparing a final rule.
A policy rider on the fiduciary rule is “toward the top of the list” of priorities to be included in an omnibus spending bill, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said Thursday.
The financial services industry and congressional Republicans have a number of targets they would like to attach to must-pass legislation, including reforms for the Consumer Financial Protection Bureau and other aspects of the 2010 Dodd-Frank financial overhaul law.
But the stakes around the fiduciary rule are high for both advocates and critics, given the tight timeline expected for its rollout.
The Obama administration, backed by liberals such as Sen. Elizabeth Warren, D-Mass., has said the rule, which would broaden the category of advisers required to act in their clients’ best interests, is necessary to protect savers. The White House has estimated that workers lose $17 billion annually in retirement savings because of advisers steering them into inappropriate, high-fee financial products in return for kickbacks from the companies offering those products.
A measure called the Retail Investor Protection Act, passed by the House in October and authored by Rep. Ann Wagner, R-Mo., effectively would stop the rule by requiring the Labor Department to wait on the Securities and Exchange Commission to act before instituting a rule.
The White House issued a veto threat to the bill, saying it “would effectively block action to protect working and middle-class families from the harmful conflicts of interest that lead to biased advice.”
A representative for Wagner told the Washington Examiner that the lawmaker “is still pushing for full defunding of fiduciary in the omnibus.”
Separately, a bipartisan group of lawmakers led by Rep. Peter Roskam, R-Ill., and Rep. Richard Neal, D-Mass., is working toward introducing legislation defining an alternative fiduciary standard. The timetable for the introduction of that bill is not settled.
Advocates of the proposed fiduciary rule want to make sure that it survives the omnibus spending bill, expected to be announced next week.
“Lawmakers who are trying behind closed doors to derail [the Department of Labor’s] fiduciary rulemaking are mistaken,” Kathleen McBride, chairwoman of the Committee for the Fiduciary Standard and a proponent of the rule, said in a message Thursday. “The fact is, more retirement investors will finally have access to advice that’s in their best interest, instead of a sales pitch. Congress needs to stand up for Americans investing for retirement and support [the Labor Department’s] fiduciary rulemaking, without delay, riders, interference or obstruction.”
Democrats have been rallying outside supporters to prevent financial services-related riders, having seen a bill to avoid a government shutdown last year roll back part of Dodd-Frank related to derivatives transactions in banks that receive government deposit insurance.
Earlier this week, liberal groups delivered 200,000 signatures opposing such riders, including ones specifically related to the Labor Department rule.
Currently, which riders make it into the final version of the omnibus is being hashed out by congressional negotiators behind closed doors.
Hensarling said he had limited expectations for what might be accomplished through the bill, but expressed faith in House Speaker Paul Ryan’s negotiating ability. “He knows what our priorities are and I think whatever the market will bear he’ll manage to get it into the bill,” he said.
