June 6 (Bloomberg) -- U.S. House Republicans are seeking to cut the budget of the main derivatives regulator and subject a new consumer financial protection agency to additional funding scrutiny in spending plans panned by Democrats.
The Commodity Futures Trading Commission’s fiscal 2013 budget would be cut by $25 million to $180 million, a level about 42 percent below President Barack Obama’s request. Under spending legislation set for committee votes today, the Consumer Financial Protection Bureau would be funded by congressional appropriations each year instead of its current system of transfers from the Federal Reserve.
The spending measures “instill stringent oversight to ensure the proper and appropriate spending of every tax dollar, particularly within government agencies that have shown recklessness in the past,” Representative Hal Rogers, a Kentucky Republican and chairman of the appropriations committee, said in a statement.
The Democrat-led Senate has yet to release spending measures for financial regulatory agencies. Legislation would need to be reconciled and passed by both congressional chambers before heading to Obama for signature.
The spending measures are “a declaration of unilateral surrender to the forces of irresponsibility that wrecked our economy several years ago,” Representative Barney Frank, a Massachusetts Democrat and co-author of the 2010 Dodd-Frank Act, said in a statement. At least $2 billion in derivatives trading losses at JPMorgan Chase & Co. demonstrate the need for higher funding levels, according to Frank and Representative Norm Dicks, a Washington Democrat and ranking member on the appropriations committee.
The CFTC, Securities and Exchange Commission, Office of the Comptroller of the Currency and Justice Department are investigating the losses at JPMorgan.
“This investigation is a timely example of why the law was necessary and why the agency should be fully funded,” Dicks said in a statement, referring to the CFTC.
The CFTC spending plan would require $32 million to be used for information technology and not on personnel. Congress had to change a budget measure last year because a similar allocation on technology might have led to layoffs at the agency.
“The result of this bill is to effectively put the interests of Wall Street ahead of those of the American public by significantly underfunding the agency Congress tasked to oversee derivatives,” Gary Gensler, CFTC chairman, said in a statement.
Under the legislation, the SEC would have $1.4 billion in funding, an increase of $50 million from current levels.
“I’d be the first to say the SEC needs more resources,” James Angel, a finance professor at Georgetown University in Washington said in a phone interview. “The problem is the SEC has a long history of misallocating resources. With the money, they hire lawyers not technology people, not markets people.”
The bill would give the IRS $11.8 billion, the same as it is receiving this year, denying the administration the 8 percent increase it sought. The IRS is responsible for implementing much of the health care law, and the bill would deny additional funding for that purpose, according to the appropriations committee.
Next page: Budget Constraints
IRS Commissioner Douglas Shulman has said that budget constraints would make it harder for the agency to enforce the tax law and respond to taxpayers’ questions.
“Objectively we are the agency that brings in the money to fund the government and so we’re the one agency that has a very substantial return on investment,” he told the subcommittee March 21. “And so I think, you know, we should be treated differently and I think the president’s budget request reflects that.”
--With assistance from Richard Rubin in Washington. Editors: Maura Reynolds, Anthony Gnoffo