Senate Democrats seek budget increases for Dodd-Frank regulators

Vote follows House effort to cut funds

U.S. Capitol building, Washington U.S. Capitol building, Washington

June 13 (Bloomberg) -- U.S. Senate Democrats are seeking to increase the budget of the main financial-markets regulators in spending plans that clash with House Republicans’ efforts to cut funds and rein in the Dodd-Frank Act.

The Commodity Futures Trading Commission’s fiscal 2013 budget would be increased to $308 million, 50 percent above its current level, as part of a broader spending plan approved yesterday by the Senate Appropriations subcommittee on financial services.

The panel also proposed a 19 percent increase in the Securities and Exchange Commission’s budget, creating a rift between the Democrat-led Senate and the Republican-run House, which has proposed cutting the commodities regulator’s funding, while giving a smaller bump to the SEC.

“The passage of the Wall Street reform bill expands responsibilities and important roles for the SEC and CFTC, and this bill provides the funding to continue this much needed reform,” Senator Dick Durbin, an Illinois Democrat and chairman of the Senate subcommittee, said in remarks prepared for the meeting yesterday.

The two chambers will need to pass spending measures and reconcile their differences before a complete bill can be sent to President Barack Obama for signature. A Republican-led House panel last week voted to cut the CFTC’s budget by $25 million, citing concerns about regulatory overreach and failures during the collapse of MF Global Holdings Ltd.

The Securities and Exchange Commission’s budget would increase $245 million to $1.6 billion under the Senate measure.

Dodd-Frank ‘Overreach’

“The concern we have is the overreach of Dodd-Frank,” Representative Jack Kingston, a Georgia Republican and chairman of the House agriculture panel, said on June 6. The CFTC also was “asleep on the job” before MF Global collapsed last year, leaving a shortfall of $1.6 billion in customer funds.

Democrats have criticized Republicans for proposed cuts in the CFTC’s budget and a plan to put the Consumer Financial Protection Bureau under congressional appropriations scrutiny each year instead of its current system of transfers from the Federal Reserve. Democrats have argued that JPMorgan Chase & Co.’s May 10 announcement of at least $2 billion in derivatives trading losses demonstrates the need for increased funding for financial regulators.

The House measure is “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 last week.

‘Sufficient Cops’

At the Senate measure’s funding level, “the CFTC will have sufficient cops on the beat to promote swap market transparency, to lower risk to the financial system, and to help protect the American people from future bailouts of the financial industry,” Gary Gensler, CFTC chairman, said in a statement yesterday.

Under Durbin’s bill, the Internal Revenue Service would get $12.5 billion, or a 6 percent increase over the $11.8 billion it received this year. That’s still shy of the $12.8 billion that the administration recommended.

The House version of the bill would deny the IRS any increase this year. Douglas Shulman, the commissioner of the IRS, has said that significant budget cuts at the IRS would cost the government money because the agency wouldn’t be able to collect as much tax revenue.

Bloomberg News

--With assistance from Richard Rubin and Phil Mattingly in Washington. Editors: Anthony Gnoffo, Dan Reichl

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