The surest sign that you are losing an argument is when you resort to making things up.
By that standard, the House Financial Services Committee is losing pretty badly.
In the past 24 hours, it has passed a bill that it says will reduce the deficit by $22 billion and unveiled a video that equates the Office of Financial Research with George Orwell's Big Brother.
But the promised government savings are totally illusory and the OFR claim is both disingenuous and dishonest.
To be clear, I'm not saying the Dodd-Frank Act is perfect or that there shouldn't be efforts to guard against some of the unintended consequences from its enactment.
But the way the Financial Services Committee seems to be approaching these problems is senseless. If the panel wants to be taken seriously, this isn't the way to go.
Let's take the two issues separately.
Late Wednesday, the panel passed a bill along party lines that would repeal the government's authority to wind down large, failing financial institutions. The bill has absolutely zero chance of actually becoming law—the Senate would never approve it and President Obama would never sign it.
But this was a symbolic vote meant to show that the GOP was serious about reducing the deficit and ending government bailouts of banks. On paper, the Republicans were bolstered by the Congressional Budget Office, which estimated that the Dodd-Frank resolution authority would cost the government $22 billion over 10 years.
The problem? The bill wouldn’t actually save the government anything. The CBO estimate is based on the idea that if a large firm fails, the Federal Deposit Insurance Corp. must borrow money from Treasury to ensure its orderly resolution.
During debate on Dodd-Frank, then FDIC Chairman Sheila Bair wanted to create a resolution fund – maintained by assessments on banks – that would be used for precisely this purpose. But Republicans at the time objected to the fund, and in an effort to secure GOP votes in the Senate, it was scratched.
Instead, the final law allows the FDIC to borrow from Treasury, but then requires the agency to assess banks after the fact, recouping all costs. The CBO said last year this provision would cost the government $22 billion – but only because it was looking at the issue from a 10-year time frame, not because it did not think the government would be repaid eventually. In other words, the CBO never said that the government wouldn't get its money back, just that by the time a large failure occurred and the industry was assessed, it wouldn't happen within a decade. (The Wall Street Journal reaches the same conclusion here.)
It is true that better information shared among the regulatory agencies is a good thing, but making that statement is hardly enough to justify creating a whole new bureaucracy like the OFR that has no constraints on size or budget and very little constraints on its mission. It becomes even less defensible when it is tasked with gathering information for the same purposes that the Federal Reserve and the FDIC do, but without the same accountability that those agencies have. Yes, by all means facilitate the sharing of information among the agencies, but do not create yet one more bureaucracy to gather it yet again in its own particular way. Yes, yes, OFR officials say that they will collect only what they say that they need, and I believe that they are sincere, but they are their own judges as to what they need, with no accountability and no limitation on that judgment either as to definition or cost for implementing it. Mission creep is a fixed law of bureaucratic life, with examples that everyone can cite.
If you do not like the term "Orwellian" (which has a long history of describing intrusive governmental authority with little accountability), then choose your own to describe this situation: a government agency has full authority (ultimately backed by ample enforcement powers) to demand of any financial services firm any information that it believes that it needs in any format and at any time, and by the way the financial firms get the privilege of paying for providing the information as well as for all of the operations of the agency that demands it.
There are also interesting Constitutional questions. The first is the taxing authority that DFA would seek to pass on to the OFR. A second is this carte blanche access to information. A fundamental principle of the Constitution is that you own your possessions, and that extends to "persons, houses, papers, and effects" and places fairly stringent limitations on government's access to that. DFA, in a way that seems inconsistent with the Constitution, would seem to blow through those limitations with regard to the OFR. The OFR would supposedly be able to obtain information that other agencies would have difficulty getting with a subpena.
Which is to say, you may disagree with the House Financial Services Committee's action, but it does not seem justified to call it "senseless."