President Barack Obama and House Republicans are headed for a collision over support for the Securities and Exchange Commission.
In the fiscal year 2012 budget it released Monday, the Obama administration would significantly increase SEC funding from its current $1.1 billion level to $1.4 billion — even while it instituted a federal spending freeze designed to reduce the deficit by $400 billion over 10 years.
Meanwhile, the House is set to begin debate this week on a bill written by the Republican majority that would cut $100 billion out of the fiscal year 2011 budget, which is still in limbo on Capitol Hill. Congress failed to pass a new federal budget last fall, forcing federal agencies to operate at their fiscal year 2010 levels under a continuing resolution.
The Republican measure in the House would cut $25 million from the current SEC budget and $188 million from Mr. Obama's fiscal year 2011 allocation.
Because of funding shortfalls, the agency is struggling to execute investor protection and market monitoring duties while implementing the massive Dodd-Frank financial reform law, SEC Chairman Mary Schapiro said in a recent speech.
The Obama administration is trying to boost the agency.
“They're putting their money behind the Dodd-Frank Act and the increased regulatory responsibility the SEC has to bear,” said David Tittsworth, executive director of the Investment Adviser Association.
Ms. Schapiro embraced the administration's 2012 budget proposal.
“These funds will provide the SEC with the resources needed to carry out both our long-standing core mission as well as our new responsibilities for derivatives,
hedge fund advisers and credit-rating agencies,” Ms. Schapiro said in a statement Monday.
Mr. Obama will have to overcome objections to his budget from Republicans who claimed a House majority in last fall's elections by promising to slash the federal deficit, which is projected to hit $1.5 trillion this year.
Their first step is the bill that would carve $100 billion out of the fiscal year 2011 budget.
“The legislation includes the largest reduction in discretionary spending in the history of our nation — over five times larger than any other discretionary-cut package ever considered by the House,” Rep. Harold Rogers, R-Ky., chairman of the House Appropriations Committee, said in a statement.
Barbara Roper, director of investor protection at the Consumer Federation of America, warned that the Republican approach would undermine the SEC and the
Commodity Futures Trading Commission.
“House Republicans have removed any remaining ambiguity about their intent to defund regulators whose role is to rein in Wall Street excess,” Ms. Roper said in a statement.
She is more hopeful about the Obama proposal.
“While less than the full funding promised in the Dodd-Frank Act and needed to ensure effective implementation, this budget nonetheless represents a reasonable compromise that would require belt-tightening at the agencies, but without putting them on a starvation diet,” Ms. Roper said.
Both the Obama budget and the House Republican bill face an arduous legislative journey to congressional approval. The House bill is likely to be stopped in the Senate by that chamber's Democratic majority.
Obama's $3.7 trillion fiscal year 2012 budget, which contains $1.1 trillion of deficit reductions over 10 years but would still produce a cumulative $7.2 trillion deficit by 2021, has been dismissed by Capitol Hill Republicans.
The confusion over two budgets floating around Capitol Hill at the same time — the unresolved fiscal year 2011 and the just-unveiled fiscal year 2012 — is heightened by the fact that the continuing resolution expires March 4. If Congress fails to pass the 2011 budget or extend the continuing resolution by then, the government could shut down.
“There's going to be a potential train wreck between the administration and the House Republicans,” Mr. Tittsworth said.
In the meantime, the SEC will have to forge ahead on its current budget.
“It looks to me like the status quo in terms of SEC activity is likely for at least a few more months,” Mr. Tittsworth said.
