We are now living through the reason the leader of Securities and Exchange Commission earlier this year called for the right for the agency to fund itself.
We are now living through the reason the Congress won’t honor that request.
It’s about power and control. It’s about the opportunity to take a second whack at signed legislation through a tight grip on the purse.
Let us summarize. SEC Chairman Mary L. Schapiro has asked for the right, granted other U.S. financial regulators, for the SEC to fund itself through the fees it collects from the companies under its purview. That would allow the agency to better meet enforcement and other duties.
Congress hasn’t budged on that issue, but did pass the Dodd-Frank law, which hugely expands the SEC’s responsibilities. You’ve probably seen the numbers: studies upon studies, whole new sectors such as hedge fund advisers to scrutinize, rules upon rules.
The Dodd-Frank law did give the SEC a bunch more money, too. By 2015 it was to get $2.25 billion, compared with the current $1.1 billion annual budget. The problem for the SEC is Congress has to separately allocate that money.
In this environment, that’s probably a tougher goal to achieve than the original, sweeping reform legislation. Next year, we’ll hear the legitimate cries for budget-cutting as Republicans take a bigger role in the Congress.
Given the back-and-forth on Capitol Hill the past few days, the likely scenario is for no new spending deal that would cover the rest of this fiscal year.
Here’s what that means, as reported by Jessica Holzer of Dow Jones Newswires: It is likely that the SEC’s funding ”will remain frozen at 2010 levels, along with the rest of the federal government, until next year. At that point, funding increases for the SEC … will face slimmer odds because Republicans, who have vowed to rein in spending, will have assumed control of the House.”
So it really doesn’t matter how rational the case is for SEC self-funding. It requires a unilateral power hand-off by the U.S. Congress. I dont think so.
As long as Congress can annually determine SEC spending, it can play an ongoing role in how much the agency can actually get done. Squeezing SEC spending, of course, won’t stop anyone in the Congress from screaming bloody murder when the watchdog agency misses the next Bernie Madoff, or can’t keep up with the consequences of some new financial industry innovation.
The SEC has already delayed some new offices called for by the Dodd-Frank law. Flat fiscal 2010 spending continuing to some unknown time in calendar 2011 won’t help.