SEC chairwoman warns of budget constraints as Republicans look to cut more
Securities and Exchange Commission Chairwoman Mary Schapiro warned on Friday that her agency doesn't have enough money to adequately police Wall Street, let alone draft dozens of new regulations required under the financial reform law.
And that's before congressional Republicans look to cut the SEC's budget further.
"It is a strain that is already having an impact on our core mission – separate and apart from the new responsibilities that Congress gave us to regulate derivatives, hedge fund advisers and credit rating agencies," Schapiro told a legal conference in Washington. "It is a strain that will intensify the longer the budget remains at existing levels."
The SEC has long complained it doesn't have enough money to oversee the markets, even though it funnels hundreds of millions of dollars in fees to the federal government. Those concerns were amplified by the financial crisis, when the SEC was accused of failing to rein in the risky behavior of financial chief executives.
The SEC's budget for the 2010 fiscal year, which ended on Sept. 30, was $1.2 billion, a boost from $960 million in 2009. President Obama's 2011 budget called for SEC funding to rise to $1.26 billion. But Congress never passed that budget.
Republican opposition scuttled attempts by Democrats late last year to provide a temporary funding boost to the SEC and another key regulator, the Commodity Futures Trading Commission. Those agencies depend on congressional appropriations for their budgets, unlike other key financial regulators, such as the Federal Deposit Insurance Corp., which are funded through industry fees.
Schapiro testified last summer that the SEC needed to hire 800 more employees to implement new regulations called for in the Dodd-Frank financial overhaul law. She said Friday that the lack of additional money has "hampered our ability to do what investors and capital markets deserve."
"So we need to ask ourselves if we want our market analysts to continue to use decades-old technology to re-create market events or to monitor trading that occurs at the speed of light," she said. Schapiro also said budget constraints could force the SEC to "to pull the plug on data management systems and on a digital forensics lab needed to re-create the data that sophisticated fraudsters leave on hard drives and iPhones."
Key House Republicans, who opposed the financial overhaul law, oppose a budget increase for the SEC and Commodity Futures Trading Commission because of the huge budget deficit.
"During our country’s current debt crisis, all branches of government –- including Congress –- have to tighten their belts and find ways to make their money go further," said Rep. Scott Garrett, chairman of the House subcommittee that oversees capital markets, last month. "A dramatic spending increase to fund the SEC and CFTC, as envisioned by the authors of the Dodd-Frank legislation, would further the mind-set that our nation’s problems can be solved with more spending, not more efficiency."
On Thursday, House Republican leaders proposed $35 billion in budget cuts for the rest of the fiscal year. They did not specify what the SEC's budget would be, but their plan included a 13% cut for the budget category that includes the agency.
-- Jim Puzzanghera
Photo: SEC Chairwoman Mary Schapiro. Credit: Getty Images.