The trillion-dollar spending bill approved by Congress this week falls well short of requested funding levels for a pair of top financial regulators, sparking concerns that the agencies will lack the resources needed to police Wall Street.
The president’s 2014 budget request sought significant funding boosts for the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The increases were meant to correspond with a host of new responsibilities placed on the agencies in the aftermath of the 2008 economic crisis.
They did not materialize. Instead, the agencies received relatively modest funding boosts, at the same time as they are tasked with implementing scores of new regulations drafted under the Dodd-Frank-financial reform law.
The White House and some regulatory officials have put a good face on the funding allotments, describing the increases as a step in the right direction.
However, others – including the top Democrat on the House Financial Services Committee – warn that the agencies will be unable to take the steps necessary to rein in the financial sector and protect against a repeat of the Great Recession.
“We're letting Wall Street run wild,” Rep. Maxine Waters (D-Calif.) told The Hill.
The spending bill adds $25 million to the SEC’s allocation, a 1.8-percent increase that raises its annual budget to $1.38 billion – well below that $1.674 billion sought by the administration.
Without additional money, the agency will be unable to strengthen its enforcement and examinations operations or carry out new duties related to the regulation of derivatives and both private and municipal financial advisors, SEC spokesman John Nester said.
The SEC also will be unable to make important investments in technology that would help their market oversight and law enforcement programs, Nester said.
“This proposed level falls short of what we need to fulfill our responsibilities to investors and our markets,” SEC spokesman John Nester said in a written statement to the Hill.
The much smaller and lesser-known CFTC has seen its workload grow dramatically, with Dodd-Frank handing the agency jurisdiction over the $400 trillion derivatives or swaps market, seen as a major contributor to the 2008 crisis.
The CFTC completed its Dodd-Frank rulemaking work more quickly than in its fellow regulators, but officials said a major funding bump was necessary to help the agency enforce the new rules.
As of last month, the CFTC had 674 workers, only 40 more than it employed two decades ago. President Obama proposed increasing the agency’s budget from $195 million to $315 million in fiscal 2014.
The spending bill provides the agency with $215 million.
Though $100 million shy of the president’s request, the 9.3-percent bump reflects the agency’s first budget increase in three years, according to the White House Office of Management and Budget (OMB).
OMB Director Sylvia Mathews Burwell said the bill, signed by the president on Friday, would help create a “a more stable and responsible financial system.”
Acting CFTC Chairman Mark Wetjen praised the allotment.
“This increase means the CFTC will be better equipped to fulfill our mission,” he said in a statement. “This funding level is a step in the right direction, and we will continue working with Congress to secure resources that match our new responsibilities to provide oversight for the vast derivatives markets.”
Bart Naylor, a financial policy advocate with the consumer Public Citizen, criticized the remarks as putting Capitol Hill diplomacy above the agency’s needs.
Naylor attributed the decisions to fund the agencies at levels lower than requested by the administration to the influence of Wall Street’s conservative allies in Congress, who would prefer less strenuous financial regulation.
“The SEC and the CFTC definitely have their enemies,” he said. “They definitely have people who are trying to starve them to death.”
Waters, who said she supported the bill rather than cast a vote in favor of a government shutdown, echoed Naylor’s assertion that some in Congress had set out to deprive the agencies of needed funding.
“They don’t want them to be able to do their job,” she said.