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For 2 Wall Street Regulators, More Belt-Tightening

January 16, 2014
In The News

Representative Maxine Waters, the ranking Democrat on the House Financial Services Committee, said on Tuesday that the proposed budget "fails to adequately fund our financial regulators."

Two primary regulators of Wall Street are preparing, once again, to make the most of scarce resources.

Under a new budget proposal, the regulators, the Securities and Exchange Commission and the Commodity Futures Trading Commission, would receive less money this year than President Obama had requested, though slightly more than they were allowed last year. Negotiators in the House and Senate hashed out the plan Monday evening, part of a $1.1 trillion agreement to finance the federal government.

The S.E.C. would have a budget of $1.35 billion for 2014, compared with the $1.67 billion that the agency requested last spring. The proposed budget is slightly higher than the agency's $1.32 billion allotment for 2013.

The futures trading commission would receive a budget of $215 million for the coming year, $100 million short of what it had requested. In 2013, the agency had a budget of $205 million.

Those proposals represented yet another disappointment for two agencies that have long tried to pry more money from a tightfisted Congress. At a time when financial markets have grown in size and complexity, the agencies say they need additional money to invest in new technology and hire and train staff.

In its budget request, the S.E.C. said it wanted to hire an additional 676 workers in 2014, including 250 more examiners. Under the deal reached on Monday, the agency would probably not reach that goal.

"They need more money to hire more boots on the ground. They're not going to get it for this fiscal year," said Duane Thompson, a senior policy analyst at fi360, a group in Bridgeville, Pa., that supports fiduciary education. "The agency has its hands tied."

Though the proposal represents an increase in the S.E.C.'s overall budget, it falls short of providing enough money to meet the agency's priorities. The S.E.C. had requested a $50 million reserve fund for technology but that was reduced to $25 million. In addition, Congress is asking the S.E.C. to spend $44 million on an analysis of the economic impact of its rules.

Though the S.E.C.'s budget is offset by fees levied on the financial industry, the agency is still dependent on Congress to set its level of spending.

"This proposed level falls short of what we need to fulfill our responsibilities to investors and our markets," said an S.E.C. spokesman, John Nester. "It is particularly frustrating considering that funding for the S.E.C. does not contribute to the federal deficit."

Representative Maxine Waters, the ranking Democrat on the House Financial Services Committee, said in a statement on Tuesday that the proposed legislation "fails to adequately fund our financial regulators."

She added: "Wall Street's cops, the Securities and Exchange Commission and the Commodity Futures Trading Commission, both need funding to ensure that the financial services industry adheres to the rules of the road."

The futures trading commission, a smaller agency that flexed its muscles with a number of enforcement actions against Wall Street last year, is trying to reconcile its regulatory ambitions with the political reality. The agency oversees the markets for swaps and futures — some of the biggest in the world — and yet its staff has barely grown in two decades.

The so-called budget sequestration further strained the agency's resources last year, forcing it to furlough staff. The agency's effective budget was $194.6 million under those cuts.

"They have been given responsibility for some of the most important regulation to protect against another crash. And yet, they're being choked on funding," said Dennis M. Kelleher, president of the consumer advocacy group Better Markets.

Mark P. Wetjen, the acting chairman of the trading commission, put on a positive face, noting in a statement on Tuesday that the budget proposal was an increase over the previous year.

"This funding level is a step in the right direction," he said, "and we will continue working with Congress to secure resources that match our new responsibilities to provide oversight for the vast derivatives markets."