SEC, CFTC would get big boosts under budget

Both agencies received an increased workload from the Dodd-Frank financial reform law, and top officials have repeatedly warned that they need a significant increase in resources to meet those obligations.

In particular, the CFTC requires an “unprecedented growth” in its resources now that it has been given the job of regulating the derivatives market, the administration said in its budget.

However, funding for both agencies remains stuck at pre-Dodd-Frank levels, as budget politics have derailed any increases. Exacerbating the situation is the fact that Republicans, now in control of the House, have given no indication that they want to hand regulators more funds to implement a financial reform law they opposed.

In addition, the GOP is adopting a laser focus on cutting spending, and may be unwilling to dole out more funds for any purpose.

To help defer costs, the administration wants the CFTC to begin collecting fees from the entities it regulates — a common practice for other financial regulators like the SEC, the administration maintained. Such a fee would bring in $117 million for the agency in 2012, the budget stated.

Such a fee would require Congressional approval, and that approval was not forthcoming from House Republicans.

Rep. Scott Garrett (R-N.J.) dismissed the fee as an accounting trick meant to hide another tax on American businesses.

Garrett, who chairs the House Financial Services Committee’s subcommittee on capital markets, argued the fee was an “off-budget accounting gimmick that will hide the true cost and scope of the federal government.”

“The so-called user fees would be one more tax to drive up the cost of Main Street businesses who are trying to responsibly hedge their risk,” he said. “They represent one more end-around to attempt to grow government even more, and done in this way, it would be outside the traditional congressional appropriations process.”>

As recently as Feb. 10, CFTC Chairman Gary Gensler warned lawmakers that his agency needed more money.

“The CFTC’s current funding is far less than what is required to properly fulfill our significantly expanded mission,” he told the House Agriculture Committee at a hearing.

SEC Chairman Mary Schapiro welcomed the president’s budget, noting that the budget hike to her agency would have no impact on the deficit, since it funds itself through fees.

“These funds will provide the SEC with the resources needed to carry out both our longstanding core mission as well as our new responsibilities over derivatives, hedge funds and credit rating agencies,” she said. “By law, the 2012 funding is entirely offset by transaction fees such that the SEC budget will not add to the deficit.”

Both Gensler and Schapiro are due to make a pair of appearances on Capitol Hill this week. The two are scheduled to appear before the House Financial Services Committee Tuesday to discuss derivatives. They also will appear alongside other head regulators at the Senate Banking Committee Thursday to discuss the implementation of Dodd-Frank six months after it was enacted.

This post updated at 12:50 pm, 1:16 pm.