When Congress approved a continuing resolution in March to keep the government funded, it did not include additional money for the Securities and Exchange Commission or the Commodity Futures Trading Commission to implement the Dodd-Frank financial reform law. The two agencies, which were given important new responsibilities under Dodd-Frank, have already had to restrict some activities, delay implementation of various aspects of the law, and put off hiring personnel to fill key new positions policing Wall Street and the nation’s biggest banks.
The budget that the Obama administration proposed yesterday included boosts for both the SEC and the CFTC, as well as a proposal to allow the CFTC to begin collecting fees to raise additional revenue. In fact, under the budget, the CFTC would receive an 82 percent funding boost (to $308 million), as it has the vast new task of overseeing the derivatives market.
However, House Republicans have made it quite clear that they have no intention of giving the regulators any additional money. In fact, their proposed continuing resolution for the remainder of the fiscal 2011 year (which ends in October) explicitly cuts funding from both the SEC and CFTC:
Securities and Exchange Commission — $25 million from 2010 level
Commodity Futures Trading Commission — $56.8 million from 2010 level
This is essentially an attempt to repeal Dodd-Frank through the backdoor, by simply making it impossible for the regulators to implement and enforce the law. As Michael Ettlinger and Adam Hersh noted, this is only inviting another devastatingly expensive financial crisis, in the name of modest savings in the short-run:
The International Monetary Fund estimates that the financial crisis has cost U.S. taxpayers, after subtracting fees and penalties paid by financial institutions, 3.6 percent of GDP — which adds up to hundreds of billions of dollars. On top of that is the cost of the gut-wrenching pain this crisis has caused for most Americans through lost wealth, high unemployment, and stagnating incomes. That’s not to mention the scores of other countries similarly afflicted. Add those up to see the true cost of not regulating finance. Talk about “million wise, trillion foolish.”
When they were in power, Republicans consistently underfunded the regulatory agencies, while appointing regulators that had no interest in actually regulating. Now that new law has been put in place to rectify the situation, the GOP is doing all it can to keep that law from coming online.