In Defense of SEC Funding
Congresswoman Maxine Waters (D-Calif.), Ranking Member of the Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises, led her Democratic colleagues on the full Committee in defense of funding for the Securities and Exchange Commission. She delivered the following remarks:
"Thank you, Mr. Speaker. I yield myself such time as I may consume.
As Ranking Member of the Subcommittee on Capital Markets and Government Sponsored Enterprises, I am extremely concerned about the impact of the Republicans' Continuing Resolution on the ability of the Securities and Exchange Commission (SEC) to police our capital markets, thereby preventing another financial crisis.
To be clear, the Republican Continuing Resolution—with its $100 billion in proposed cuts—is an assault on job creation, vulnerable populations, and our communities. However, it is also an assault on our financial markets. If the SEC is level-funded or funded at 2008 levels, we risk defunding the main agency with oversight over the risky financial products that started the 2008 financial crisis.
Let's talk about what happened in 2008. In 2008, our financial markets collapsed. In 2008, it was clear that the SEC didn't have the tools or resources it needed to monitor or police those markets. So, frankly, I don't understand why Republicans would want to fund the SEC at the same level of funding it received in the year when it lacked the resources to monitor financial markets that were spinning out of control.
From 2005 to 2007 (during the build up to the crisis that imploded in 2008), the SEC lost 10 percent of its staff. In addition, from 2005 to 2009 the SEC's investments in information technology declined 50 percent. During this same period, trading volume doubled: the number of investment advisors has increased by 50 percent and the funds they manage have increased 55 percent to $33 trillion.
Let's put these numbers into perspective. The SEC's 3,800 employees currently oversee approximately 35,000 entities—including 11,450 investment advisers, 7,600 mutual funds, 5,000 broker-dealers, and more than 10,000 public companies. Furthermore, these staff police companies that trade on average 8.5 billion shares in the listed equity markets alone every day.
The Dodd-Frank Act will prevent the next crisis by authorizing the SEC to regulate derivatives, provide oversight of investment advisors and broker-dealers, and reign in credit rating agencies. In order to do this, the SEC needs additional funding. Unfortunately, House Republicans don't want the SEC to staff up or to even maintain their current staffing levels. If funded at FY 2008 levels, the SEC would have to lay off hundreds of staff and cut its IT budget down to $86 million, its lowest level of IT spending since 2003. At this level, the SEC would not be able to implement the new systems it needs to protect the nation's securities markets.
This attack on the SEC is even more disturbing because the agency's funding will be deficit neutral. Beginning in Fiscal Year 2012, fees collected by the SEC will match its Congressional appropriation.
The critical role that the SEC plays in our nation's financial markets is precisely why Wall Street—the very entity the SEC regulates—is asking for Congress to fully fund this agency. According to a February 7th article in the New York Times, 41 prominent securities lawyers and professionals have already written to Congress to ask for full funding for the agency.
Mr. Speaker, the SEC needs a sufficient level of funding. If Wall Street's "cop on the beat" is unavailable, we risk another financial crisis and the loss of more jobs.
Thank you. I yield back the balance of my time."