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Fri Apr 13, 2012, 03:48 PM

House Republicans Draft Repeal of Dodd-Frank Resolution Powers

http://www.businessweek.com/news/2012-04-13/house-republicans-draft-repeal-of-dodd-frank-resolution-powers

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The repeal is part of a broader measure the panel is required to produce that would cut at least $29.8 billion. Bachus is proposing to cut $35.1 billion over 10 years through four actions: repeal of the resolution authority; ending the Obama administration’s Home Affordable Modification Program; a reauthorization with structural changes to the the National Flood Insurance Program; and placing the Consumer Financial Protection Bureau under the congressional appropriations process.

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The resolution authority was drafted by lawmakers in the wake of the 2008 financial crisis that led to the failure of Lehman Brothers Holdings Inc. (LEHMQ) (LEHMQ) and a series of ad-hoc bank mergers and bailouts. The new resolution structure, signed into law by President Barack Obama in July 2010, was at the core of Dodd-Frank’s provisions to prevent future bailouts by giving the FDIC authority to liquidate even the biggest insolvent firms.

Resolution Authority ‘Essential’

“Developing a credible capacity to place a systemically important financial institution into an orderly resolution process is essential to subjecting these companies to meaningful market discipline,” Martin J. Gruenberg, the FDIC’s acting chairman, said in a March 13 speech. The agency last year finalized the implementation of the liquidation authority.

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The CBO said in 2010 that “most of” the direct spending to come from Dodd-Frank over the next decade would be the result of the implementation and operation of the resolution powers. The CBO said in total, Dodd-Frank would not add to the deficit, due to several revenue raising measures included in the law that would offset any costs.
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CBO Testimony on the Dodd-Frank Wall Street Reform and Consumer Protection Act

The figure below summarizes CBOs estimate of the budgetary effects of the legislation during the 2010-2020 period. CBO estimated that the act would increase both direct spending and revenues between 2010 and 2020, reducing deficits, on net, by $3.2 billion. (Direct spending is that which is not governed by appropriation acts.) In addition, CBO estimates that the Dodd-Frank Act will lead to an increase of $2.6 billion in discretionary spending over the five-year period ending in fiscal year 2015 (and additional sums in subsequent years), assuming that lawmakers provide the necessary appropriations in the future.
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CBO Estimate of the Net Deficit Effects of H.R. 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act

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