The resolution authority was included in the 2010 financial overhaul as a measure to prevent a financial crisis similar to that in 2008. Republican members of the House have remained skeptical of the authority and have put the measure on the chopping block in an effort to cut $22 billion from the budget over the next 10 years, Reuters reports.
Barney Frank, the co-author of the 2010 legislation, cited the repeal as a setback, adding that now “there is no capacity to deal, in a reasonable way, with a failed institution,” according to Reuters.
Under the current procedure, after the U.S. government acquires a failing institution, the FDIC can borrow money from the U.S. Treasury to resolve the firm. Then the FDIC must impose a fee on other large financial firms in order to recoup the costs. To replace the resolution authority, Republicans have suggested that failing financial institutions should go through the bankruptcy process.
In response to this suggestion, Democrats have presented an amendment to the authority that would collect the funds upfront so the FDIC would not have to borrow as much in the future, though the amendment was rejected, Reuters reports.
The committee, in addition to repealing the resolution authority, also voted to subject the Consumer Financial Protection Bureau’s budget to the congressional appropriations process, put an end to the 2008 foreclosure prevention program and restructure national flood insurance programs.