SEC’s Kotz Says Budget Cut Would Hurt Dodd-Frank Implementation
Securities and Exchange Commission efforts to meet regulatory burdens imposed by the Dodd-Frank Act would be hampered by a Republican plan to roll back funding for the agency, the agency’s watchdog told lawmakers today.
“It would be difficult to implement many of those responsibilities if there were cuts and they didn’t have sufficient funds to do it,” SEC Inspector General H. David Kotz said at a House Appropriations subcommittee hearing called to discuss ways to eliminate waste, fraud and abuse at the agency.
House Republicans have proposed cutting federal spending back to 2008 levels for the rest of the current fiscal year to help reduce the nation’s budget deficit. Such a rollback for the SEC would come as the agency writes more than 100 rules to implement that biggest regulatory overhaul since the 1930s.
The SEC is already operating with less funding than it was promised for its Dodd-Frank responsibilities as a congressional budget impasse has left agency spending allocations frozen at fiscal 2010 levels. Reducing that $1.1 billion allocation to the level Republicans are seeking would force the agency to cut 600 of its 4,000 employees, Kotz said today.
Representative Jo Ann Emerson, the Missouri Republican who leads the Appropriations financial services subcommittee, said the SEC’s track record raises questions about the agency’s effectiveness in spending federal dollars.
“My concern is that we have doubled the SEC’s budget over the last nine years,” Emerson said. “At the same time, we’ve had Madoff and Stanford and numerous other issues,” she said referring to cases in which the agency was accused of being slow to respond to claims that money managers Bernard Madoff and R. Allen Stanford were running multibillion-dollar Ponzi schemes.
Property Leasing
Lawmakers also questioned Kotz about his claims that the SEC has spent wastefully on procurement, contracting and property leasing in the absence of clear administrative guidelines at the agency.
Kotz said he is conducting an investigation of the agency’s real-estate leasing, focusing on excess space acquired at Washington’s Constitution Center.
“We’re asking, ‘How on earth could you have thought that you would need 900,000 square feet of space?’” he said. “Maybe there are good answers.”
Many problems that have been brought to the attention of top SEC officials have been fixed and “will not recur,” Kotz said. The agency may need additional funding to institute some of the suggested changes, he said.
To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.
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