Two of the nation’s top financial regulatory agencies don’t have enough funding to competently regulate the Wall Street banks they oversee, top regulatory officials told the Senate Banking Committee yesterday. The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) both took on new regulatory responsibilities under the 2010 Dodd-Frank Wall Street Reform Act, but multiple rounds of Republican-led budget cuts aimed at neutering the new law have left them without sufficient funding to carry out those mandates.

As a result, the agencies are “outgunned” by the Wall Street banks they oversee, SEC head Mary Schapiro and CFTC head Gary Gensler told the committee Tuesday, the Huffington Post reports:

“We’re way underfunded at the CFTC,” Gensler told lawmakers, after a question on the subject from Senator Chuck Schumer (D- N.Y.). “Imagine if, all of a sudden, there are eight times the number of teams on the [football] field, but only seven refs,” Gensler said. “There would be would be mayhem on the field. The fans would lose confidence.”

SEC chief Schapiro echoed the point: “We’ve been asked to take on very significant new responsibilities,” she said. Though the SEC has made progress in hiring new staffers and improving its technological capabilities, Schapiro conceded that, in some areas, the efforts haven’t gone far enough.

As ThinkProgress noted in January, adequately funding the CFTC and SEC is imperative to successfully implementing new regulations and policing Wall Street. Republicans oppose those efforts and have repeatedly pushed for cuts to the agencies’ budgets. “The less we fund those agencies,” Senate Minority Leader Mitch McConnell said last June, “the better America will be.”

The SEC is funded by fees paid by banks, not by taxpayers, so cuts to its budget won’t affect the federal deficit. But it is prohibited from collecting more in fees than it is allocated in the budget, so the $225 million cut Republicans pushed last year amounts to a massive giveaway to Wall Street, which will save exactly that amount.

As the 2008 financial crisis demonstrated, failure to police Wall Street can have perilous consequences for American taxpayers and the economy. But when one party’s purpose, as Rep. Spencer Bachus (R-AL) said last year, is to “serve the banks,” preventing another such fiasco is apparently of little matter.

For decades, cotton farmers and buyers, like clothing makers, have used commodities futures markets to hedge against natural price volatility, which helps them to survive bad years. Now, however, Wall Street speculators like banks and pension fund have swamped the markets, controlling larger portions than the people who actually use the cotton, McClatchy reports.

These speculators, who have no intention of ever taking delivery of the product and treat futures contracts like a stock, have driven up prices and price volatility, making things harder for the people who grow the product, the companies that turn the raw material into finished goods, and the consumers who purchase those goods:

Such financial speculation helped drive an overheated cotton market to record levels of $2.17 a pound on March 7. Before peaking, cotton prices had risen by more than 140 percent in less than 18 months. … [T]his speculative money from investors who’ll never actually take delivery of cotton is distorting the futures market, driving up cotton prices, and thus raising prices for apparel retailers and consumers alike.

Sifting through CFTC historical data, McClatchy found that the total number of outstanding futures contracts grew by about 80 percent from 1990 to 2010. That’s big growth in a historically small market. Moreover, the number of contracts doubled between 2004 and 2010. This parallels the timeframe when institutional investors began to play seriously in commodity markets, aided by popular commodity indices developed by investment bank Goldman Sachs and the now-disgraced financial giant American International Group.

The problem with speculation in cotton can be seen across many commodities futures market, whether it’s for coffee, wheat, or oil, where speculation drives up the cost of gasoline for drivers.

Unfortunately, the agency that could help rein in speculators and address this problem, the Commodity Futures Trade Commission (CFTC), has been a frequent target of the GOP’s war on regulation. Despite the severity of the speculation problem across various markets, Republican lawmakers last month gave the commission a 2012 budget allocation one third lower than President Obama’s request. That, despite the fact that the CFTC is already stretched thin and will have to take on vast new responsibilities in implementing the Dodd-Frank Wall Street reform law. This funding level so the stingy that the agency may be forced to lay off 60 workers — 8 percent of its staff.

“Without limiting the total speculation in each market, farmers and consumers will continue to needlessly suffer from higher and volatile prices,” said Dennis Kelleher, president and CEO of Better Market, an organization which works for more transparent markets. “We have seen the results of an ill-funded and ill-equipped regulator. It isn’t a pretty picture,” said Bart Chilton, a Democratic commissioner for the CFTC.

The current round of funding for the federal government runs out on Friday, but House and Senate negotiators have reportedly agreed to a new funding package under the guidelines of the deal that raised the debt ceiling over the summer. One of the casualties of the budget cuts imposed by this agreement will be the Commodity Futures Trading Commission, a key financial market watchdog charged with implementing large swathes of the Dodd-Frank financial reform law:

Congressional lawmakers have agreed to give the Commodity Futures Trading Commission far less money than it requested for fiscal 2012, potentially limiting the agency’s ability to implement the expanded powers it received under the Dodd-Frank financial law.

Congressional aides on Monday said that the CFTC would receive $205 million for the year, $100 million less than the amount sought by the Obama administration, as part of a compromise dropping a number of proposed policy restrictions that could have delayed the implementation of Dodd-Frank rules even further. [...]

Senate Democratic lawmakers had pushed for a budget of $240 million for the agency, while the Republican-controlled House wanted to keep its fiscal 2012 budget broadly flat at $170 million, from the $169 million the agency had in fiscal 2011. The administration had sought $308 million for the CFTC for fiscal 2012.

According to a study by the Government Accountability Office, the CFTC needs $77 million above last year’s funding level to adequately fulfill its new duties under Dodd-Frank. Instead, the agency is receiving about half of that amount.

The CFTC is responsible for policing the nation’s commodities markets — including the oil market, where speculation has exploded in recent years — and is also tasked under Dodd-Frank with regulating derivatives, the complex financial instruments that were at the heart of the 2008 financial crisis. Refusing to give the agency enough funding to complete these tasks is just one more way that the GOP is hoping to slow down the implementation of new financial regulations.

“[Republicans are] trying to sabotage the situation by not giving money,” said House Financial Services Committee ranking member Barney Frank (D-MA). “These are complicated subjects that involve very smart people, and we need technology and resources for these agencies.” As the New Republic’s Timothy Noah suggested, perhaps its time for the Occupy protesters to visit House Appropriations Committee Chairman Hal Rogers (R-KY) and “ask why he’s starving the financial watchdogs.”

This week, the House plans to vote on the fiscal year 2012 Agriculture appropriations bill, which provides funding to, among other agencies, the Department of Agriculture, the Food and Drug Administration, and the Commodity Futures Trading Commission (the nation’s commodities market watchdog). House Republicans have been crowing that this bill cuts agriculture funding by nearly $3 billion from last year’s level, and is coming in $5 billion below President Obama’s 2012 budget request.

“This legislation reflects hard decisions to cut lower priority programs, reduce spending in programs that can be scaled back, and target funds where they are needed most so that our nation continues on the path to fiscal recovery,” said House Appropriations Committee Chairman Hal Rogers (R-KY). Evidently, the House GOP finds nutrition assistance for low-income women and their children to be a “lower priority program,” as the bill cuts the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to such an extent that 325,000 to 475,000 currently eligible women and children will be denied help.

The bill also cuts funding for the CFTC, despite that agency’s new responsibilities to police derivatives and oil speculation under the Dodd-Frank financial reform law. However, among the GOP priorities in the bill are ensuring that the National Arboretum maintains its azalea collection and calling for regulators to not apply the Animal Welfare Act on movie sets. Here are some of the bill’s highlights:

– MAINTAINING NATIONAL AZALEA COLLECTION: “The Committee directs the National Arboretum to maintain its National Boxwood Collection and the Glenn Dale Hillside portion of the Azalea Collection. The Committee encourages the National Arboretum to work collaboratively with supporters of the National Arboretum to raise additional funds to ensure the long-term viability of these and other important collections.” [Pg. 13]

– ENSURING THAT THE ANIMAL WELFARE ACT DOESN’T APPLY TO MOVIE SETS: “While the Animal Welfare Act’s intent is to establish minimally acceptable standards in the treatment of animals in research, exhibition, transport, and by dealers, the law was not aimed at regulating companion animals used as extras in the background of movies and television productions. The Committee urges the agency to use the Secretary’s discretionary authority to seek alternative means of meeting its statutory mandate, including the option of issuing exemptions or master exhibitor licenses to these pet owners.” [Pg. 19]

– $4 MILLION INCREASE IN WILDLIFE DAMAGE MANAGEMENT: “Wildlife Damage Management – The Committee provides $72,500,000 for Wildlife Damage Control, approximately $4 million above the President’s request…. Special emphasis should be placed on those areas such as livestock protection…predator control, and other threats to agriculture industries.” [Pg. 20]

Ensuring that an azalea collection is maintained and giving more funding to wildlife damage management are fine goals, but the GOP is trumpeting this bill — which cuts off hundreds of thousands of women and children from nutrition assistance and prevents regulators from reining in oil speculation that is out of control — as a reflection of their priorities. If that is true, it’s a pretty stark statement as to what House Republicans find important.