WASHINGTON — More than 20 months after the Dodd-Frank Act became law, it's still the main area of partisan conflict for the House Financial Services Committee, but it's being recast as part of the debate over deficit reduction.
On Tuesday, 19 of the panel's 27 Democrats released a written dissent to a recent Republican effort to repeal the provisions of the law that establish a system for winding down large financial firms. Republicans claim that the proposal, which passed the committee on a party-line vote last week, will cut the deficit by $30 billion over 10 years.
But the Democrats, led by Rep. Barney Frank, noted that Dodd-Frank's liquidation authority will not increase the deficit over the long term, and said the 10-year window offers a misleading picture because the law requires the government to eventually recover the costs of any liquidation from large financial firms.
"We are very disappointed by the partisan, non-substantive approach taken by the Republican majority to the important issue of deficit reduction," the Democrats said in their statement.
At last week's hearing, committee Democrats made a counter-proposal. Instead of repealing the liquidation authority, they argued, $30 billion should simply be collected from the industry to fund any large bank failure.
"The Republicans, expressing great sympathy for the banks which they believe, apparently, to be overtaxed," the Democrats wrote in their dissent, "and thinking that these banks should not have to contribute to paying the cost of the financial crisis they caused, voted this down on a party line vote."
Republicans cast the Democratic offer in very different terms.
"Everyone knows this tax would be paid by consumers at a time when Americans are already being hit with a doubling of gas prices since President Obama came into office," committee Chairman Spencer Bachus said in an April 18 press release. "This tax would also drive up the cost of credit, reduce services and weaken the U.S. economy."