SEC IG warns against budget cuts

In testimony before a House Appropriations subcommittee, David Kotz, inspector general for the SEC, noted that the agency — which was criticized for its work looking into Bernie Madoff and Allen Stanford — had also been found to have significantly wasted resources in areas like procurement and in its securing of real estate. 

But Kotz added that the agency was trying to follow through on some of his office’s recommendations for improvements. And when asked by Rep. Jo Ann Emerson (R-Mo.), the chairwoman of the House Appropriations subcommittee on financial services, about the impact of potential budget cuts on the agency, Kotz said he had been told by the SEC that it would have to cut some 600 jobs if its funding level was rolled back to 2008 levels.

“I think I would have some concerns about the SEC losing 600 people in terms of being able to continue to do the work they did,” Kotz said.

Kotz’s testimony came as House Republicans are working to cut billions of dollars in non-security discretionary spending. A new spending measure that was expected to be unveiled by the GOP on Thursday was abandoned after more conservative lawmakers pushed for even deeper cuts. 

For her part, Emerson noted that the SEC’s budget had significantly increased over the last nine years. With the agency falling short in various areas over that timespan, she added, some of her colleagues had doubts the SEC could fulfill its duties. 

After the hearing, Emerson did not say whether she supported decreasing the SEC’s funding to 2008 levels. But she did say, given the agency’s recent problems, “there’s something wrong with the system that exists today and maybe sometimes when you look within and you restructure from within, you can solve a lot more problems more efficiently with the same number of people.”

The congresswoman also expressed concern that new SEC offices created by the Dodd-Frank Wall Street reform law would overlap with work the agency is already assigned, saying she wasn’t convinced that the new offices “wouldn’t be a duplication of effort” and that the agency should look at its structure to see if it could reorganize to avoid that. Kotz said that the issue should be examined once the new offices are up and running.

Kotz also said he was worried about some of the agency’s decisions on where to set up shop in the Washington and other areas and signaled that the SEC might think of looking into securing office space in less expensive suburban areas near cities such as New York. The agency was also criticized for leasing out hundreds of thousands of square feet of office space at Washington’s Constitution Center, a move the agency has reportedly worked to modify.