Shutdown savages some regulators

The government shutdown’s axe has dealt an uneven blow to the nation’s financial regulators, virtually shuttering at least one agency while leaving others at full strength. 

On balance, financial regulators have been spared the brunt of the shutdown, though thousands of additional furloughs could be on the way as leftover funds begin to dry up.

Some agencies, including the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are not funded through congressional appropriations, so they are largely unaffected by the shutdown that has taken hundreds of thousands of federal workers off the job. 


The effect on other regulatory agencies has been wildly disparate. Take, for example, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC): two rulemaking agencies charged with protecting the integrity of U.S. financial markets. 

While the SEC has thus far remained virtually unscathed, the far smaller CFTC has been decimated. 

“We really are not overseeing markets right now,” Chairman Gary Gensler said on Friday. “It’s cursory at best.” 

All but about 30 of its 680 workers have been furloughed. Those few staffers remaining on the job have been forced to double- or triple-up their responsibilities, and many are the only ones in their division at work.

“It’s a little lonely,” Gensler said. “We’ve got one or two people a floor and they’re dark.” 

Gensler said furloughed staff would eventually go back and look at financial data from during the shutdown once it ends. He did not expect massive amounts of fraud while the agency was shuttered. 

The SEC, meanwhile, is working with its full complement of staff, as it draws on unspent funds from fiscal 2013 that will last for “several weeks,” according to an agency official. Administrators have curtailed some travel, the agency said, but few other operations have changed. 

“From where I stand right now, it’s pretty much business as usual right now,” said Jason Moreau, a partner with the McDermott, Will and Emery law firm who deals with the agency, “but we’re reaching that point where I think that if they don’t find a resolution soon, we’re going to see kind of a curtailment and a change soon.” 

John Reed Stark, former chief of the SEC’s Office of Internet Enforcement, who was at the agency during the last shutdown in the mid-1990s, said the SEC appeared well prepared to weather the lapse in appropriations. 

The SEC, with a new chairwoman in Mary Jo White and a host of new personnel in the agency’s upper echelons, is intent on tackling top priorities, which include finalizing a host of Dodd Frank Act regulations and rooting out bad actors in the financial sector, Stark said. 

“These people are refreshed and fired up,” he said. “I can’t imagine this shutdown slowing things down.” 

If money does run out, the SEC is preparing to furlough all but about 250 of its more than 4,100 employees, according to a plan filed with the White House. 

Those staffers would handle emergency actions, watch markets, monitor filing systems and perform administrative work, though efforts to write new rules and perform some routine oversight will be halted, the contingency plan outlined. 

Even in that event, Stark, who spent almost two decades at the SEC, said the agency’s enforcement division would likely remain up and running. 

“They will find a way to keep going,” he said of the unit, which includes hundreds of investigators. 

Bart Naylor, a financial policy advocate for the consumer group Public Citizen, said he had been in contact with the heads or other senior staff at seven regulatory agencies, including the CFTC, the SEC, the Federal Reserve and the Federal Deposit Insurance Corporation. 

The officials, he said, reported varying degrees of activity at the agencies. While some said entire floors of offices were nearly empty, most agencies have said they are putting a premium on operations in place to monitor the financial sector for malfeasance. 

“I don’t get a sense that now’s the time to rob a bank,” Naylor said. 

But he said the agencies’ inspector general offices, which conduct internal investigations, had been hit hard by the shutdown. That some agencies are affected much more than others is itself a reason to be concerned by the shutdown, Naylor said. 

 “It is a little freaky, as an American citizen who relies on regulated banks," he said.