Background

On September 14, 2017, the House passed the remaining FY2018 appropriations bills as H.R. 3354, which included the Financial Services and General Government (FSGG) Appropriations bill (H.R. 3280) in Division D. An FY2018 FSGG bill has not yet been introduced in the Senate.

Although financial services are a focus of the FSGG bill, the bill does not actually include funding for most of the financial service regulators. Instead, this funding comes through a variety of sources, including fees or assessments on regulated institutions. (See CRS Report R43391, Independence of Federal Financial Regulators: Structure, Funding, and Other Issues.)

Federal regulation of the banking industry is divided among the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), the Office of Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB). In addition, credit unions are regulated by the National Credit Union Administration (NCUA), and the housing government-sponsored enterprises are regulated by the Federal Housing Finance Agency (FHFA). None of these agencies receive their primary funding through the appropriations process.

Federal securities regulation is divided between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), both of which are funded through appropriations. CFTC appropriations from the general fund are set in FSGG bill in the Senate and the Agriculture bill in the House, whereas the SEC funding is set in the FSGG bill in both, but then offset through fees collected by the SEC.

Financial CHOICE Act Provisions

Although funding for many financial regulatory agencies may not be provided by the FSGG bill, legislative provisions affecting financial regulation in general and some of these agencies specifically have often been included in FSGG bills.

The provisions in Titles IX and X of H.R. 3354 (Division D) are identical, or nearly identical, to some sections in the Financial CHOICE Act (H.R. 10), which passed the House on June 8, 2017. (For more information, see CRS Report R44839, The Financial CHOICE Act in the 115th Congress: Selected Policy Issues.) Many of these provisions would amend the 2010 Dodd-Frank Act. H.R. 10, however, contained a much broader range of provisions than H.R. 3354.

Table 1 below contains a listing of the sections from H.R. 3354 and the corresponding sections of H.R. 10. In addition to several provisions providing regulatory relief in banking and securities markets, policy changes in the FSGG bill include the following:

• SIFI Designation. Dodd-Frank applied enhanced prudential regulation to nonbank financial firms if they are designated as systemically important financial institutions (SIFIs) by the Financial Stability Oversight Council (FSOC). H.R. 3354 would repeal FSOC's ability to designate nonbank financial firms for enhanced regulation.
• OFR. Dodd-Frank created the Office of Financial Research (OFR) to provide research support to FSOC. H.R. 3354 would eliminate OFR.
• Appropriations. As mentioned above, aside from the SEC and CFTC, most financial regulators determine their own budgets and assess fees to cover expenditures. H.R. 3354 as amended would bring the remaining financial regulators except for the NCUA—the FDIC, OCC, Fed, CFPB, and FHFA—as well as FSOC into the appropriations process. The Fed's spending related to monetary policy and the FDIC's deposit insurance fund would remain outside of the appropriations process. Fees and assessments that agencies currently collect to fund themselves would typically appear as offsetting collections in the federal budget.
• CFPB. In addition to the funding changes, H.R. 3354 would repeal the CFPB's supervisory authority and its authority to regulate small dollar credit (e.g., payday loans); unfair, deceptive, or abusive acts and practices (UDAAP); and arbitration agreements in financial products.
• Risk Retention. H.R. 3354 would amend the provision of the Dodd-Frank Act mandating risk retention rules by applying those requirements only to securities that are wholly composed of residential mortgages. Securities backed by assets that are not residential mortgages—such as commercial real estate mortgages, commercial loans, auto loans, or other types of debt—would not be subject to the risk retention rule.
• Volcker Rule. The Volcker Rule from Dodd-Frank prohibits banks from proprietary trading of "risky" assets and from "certain relationships" with risky investment funds, including acquiring or retaining "any equity, partnership, or other ownership interest in or sponsor[ing] a hedge fund or a private equity fund." H.R. 3354 would repeal the Volcker Rule.
• Bankruptcy for Financial Institutions. H.R. 3354 would add a new subchapter to the Bankruptcy Code designed specifically to handle the arguably unique characteristics associated with the failure of certain financial firms.

Other provisions related to financial regulation include Section 114 of Division A, which would repeal the Department of Labor's 2016 Fiduciary Rule, and H.Amdt. 441, which would prohibit the use of appropriated funds toward enforcing the SEC's conflict minerals rule.