One of the many ways in which House Republicans have sought to undermine the Dodd-Frank financial reform law — and the tactic that has been most successful — is denying the regulatory agencies that police financial markets enough funding to adequately do their job. The GOP, in particular, has denied funding to the Securities and Exchange Commission, despite that agency’s vast new responsibilities under Dodd-Frank.
This week, SEC Chairman Mary Schapiro implored Congress to give her agency the funding it needs. In the House Financial Services Committee yesterday, Rep. Barney Frank (D-MA) offered an amendment to do just that, but House Republicans voted it down on party lines.
But the worst part about the GOP’s intransigence when it comes to funding the SEC is that the agency isn’t even paid for by taxpayers. Instead, its budget comes from fees assessed on Wall Street. So refusing to fund it undermines regulatory enforcement, and just leaves more money to the banks:
Cutting the S.E.C.’s budget will have no effect on the budget deficit, won’t save taxpayers a dime and could cost the Treasury millions in lost fees and penalties. That’s because the S.E.C. isn’t financed by tax revenue, but rather by fees levied on those it regulates, which include all the big securities firms.
A little-noticed provision in Dodd-Frank mandates that those fees can’t exceed the S.E.C.’s budget. So cutting its requested budget by $222.5 million saves Wall Street the same amount.
The SEC regulates more than 35,000 institutions, and to give a sense of the funding gap it faces, JP Morgan Chase spends four times the SEC’s entire budget on information technology alone.
As the New York Times’ James Stewart put it, “given the magnitude of the S.E.C.’s task, Congress could make Wall Street firms pay more and not less to police the mess they helped create.” However, House Republicans have refused to do that, instead following House Financial Services Committee Chairman’s Spencer Bachus’ (R-AL) philosophy that Washington’s role is to “serve the banks.”