Financial regulators again warned lawmakers Wednesday that their budgets were insufficient to monitor the rapid-fire world of modern financial markets.
Appearing before a Senate Appropriations subcommittee, the heads of the Securities and Exchange Commission, and Commodity Futures Trading Commission said they needed more funds as they tackle expanded responsibilities after the financial crisis, monitoring markets that are constantly changing.
Wetjen told senators that his agency is supposed to monitor 15 different clearing houses that guarantee trades between buyers and sellers of derivatives. Financial regulators have determined these clearing houses are critical to the financial system, but under its current budget, the CFTC could only examine two a year.
Meanwhile, SEC Chairwoman Mary Jo White said her agency was at a “critical juncture” in overhauling its technology efforts to keep up with lightning-quick markets, and additional funding would provide an essential boost.
“I don’t think we can overstate the important of sufficient funding … for technology,” she said.
Both agencies are operating under budgets that have grown somewhat in recent years but are well below what the administration requested. The CFTC asked for $280 million in its fiscal 2015 request and is currently operating under a budget of $215 million. The SEC asked for $1.7 billion and received $1.35 billion.
Despite their warnings, there was little sign that the regulators could actually expect significant boosts in their funding anytime soon. Congress is currently operating under a two-year budget agreement, and while it rolled back some of the sequester cuts, it did not free up huge amounts of room for appropriators.
“The bipartisan message sent to everybody is that this is going to be very tight, very challenging and very difficult,” said Sen. Mike Johanns (R-Neb.) of the budget deal.
Democrats, as they have in the years since the crisis, argued that funding for regulators is more critical than ever. They also pointed out that both agencies have effectively paid for themselves by collecting more in fines than their budgets. Furthermore, they noted that the SEC’s funding is actually derived from fees on the industry, not Congress’s pocketbook and has no effect on the deficit.
But despite those efforts, Republicans have traditionally resisted such funding pleas, arguing that regulators have enjoyed consistent hikes in funding over the last decade, while noting missteps in the past to argue against additional resources.
Sen. Jerry Moran (R-Kan.) raised the specter of Bernie Madoff at Wednesday’s hearing, noting again that the infamous Ponzi schemer escaped the SEC’s gaze, despite several advance warnings of his fraud.
White, whose time at the regulator came years after that multibillion dollar scam, said the SEC has learned from past mistakes. While she would not guarantee the SEC would not err again, she was confident changes were made to minimize that risk.
“I believe that would have been detected and proceeded upon [now],” she said. “I think it has been built to prevent that from ever happening again.”