By Peter Schroeder - 03/06/12 05:33 PM EST
Any delay puts off a keystone of the Wall Street reform effort, which advocates say is sorely needed to keep banks from engaging in risky trades, putting the entire financial system at risk. On the other side of the ledger, financial institutions argue that too harsh a rule could severely limit their ability to keep markets liquid and functioning.
Regulators initially proposed a version of the Volcker Rule in October that ran hundreds of pages and asked just as many questions of the public as they grappled with making the rule a reality.
When asked by Rep. Mario Diaz-Balart (R-Fla.) if regulators would be better off scrapping the proposal and starting over, Schapiro was noncommital.
“Whether we start right from the beginning again or not, I can tell you we will and are reviewing all the comments letters carefully and rethinking how we should approach the statutory requirement,” she said. “We have a lot of issues to work through.”
Schapiro’s comments came amid her push for $245 million more in funding in the coming fiscal year, which would bring the agency’s annual budget to $1.566 billion. It appears, however, that the regulator will have a tough time realizing that full request, given continued reticence from Republicans about the work of the SEC, both in terms of quality and the slew of new regulations it is charged with thanks to the Dodd-Frank financial reform law.
Rep. Jo Ann Emerson (R-Mo.), chairwoman of the House Appropriations subcommittee on Financial Services and General Government, opened the hearing by running down a slew of previous agency missteps, including failing to sniff out Bernie Madoff’s Ponzi scheme and purchasing unneeded office space.
Those issues were “symptoms of fundamental problems within the SEC’s organization and structure,” she said. “This body is reticent to throw more money at the SEC until you all have proven that you have addressed the structural problems from within.”
Furthermore, in a time when lawmakers are looking to trim the budget, she said boosting funds for an agency that received roughly $200 million more last year seems a difficult proposition.
“I realize of course you do have a lot of added responsibilities because of Dodd-Frank, but most agencies haven’t received increases like y’all — not even close,” she said.
Meanwhile, Democrats pushed hard for full funding, noting the SEC has seen its workload and the importance of that work climb since the financial crisis.
“You are responsible for making sure what happened in the past doesn’t happen again,” said Rep. Jose Serrano (D-N.Y.), ranking member on the subcommittee.
Schapiro acknowledged previous missteps by the agency, most before she took it over in 2009, and highlighted the agency’s climbing enforcement work and agency reforms as proof it is on the mend. The requested budget boost would allow the SEC to hire roughly 676 more people, as well as make key investments in technology to keep up with the modern marketplace.
And Schapiro also noted for lawmakers that the SEC’s budget does not add or subtract from the deficit. While Congress sets its budget, the funds actually come from fees assessed on the financial services industry.