Financial market regulators, months behind in writing rules to implement the Dodd-Frank reforms and under pressure to probe the collapse of broker MF Global more vigorously, would get a big budget boost in the coming fiscal year from the spending plan that the White House proposed on Monday.
The Securities and Exchange Commission would get an 18.5 percent funding increase while the Commodity Futures Trading Commission would receive a 50 percent spending jump under the Obama administration's fiscal 2013 budget.
The SEC's budget would rise to $1.566 billion from 2012's budget of $1.321 billion, while the CFTC would see a 50 percent spending jump to $308 million from $205 million. The president also called for legislation to fund the agency through user fees, bringing it in line with most other financial regulators.
Without sufficient funding ... the nation cannot be assured that this agency can oversee the futures and swaps markets, that customers are protected, and that the public gets the benefit of transparent markets and lower risk, Gary Gensler, the chairman of the CFTC, said in a letter to lawmakers discussing the budget.
The Obama administration, under fire for a dearth of significant prosecutions related to the 2007-2009 financial and housing market meltdown, also called for adding $55 million to the Justice Department's proposed budget to prosecute financial crimes.
That would bring the proposed budget for such prosecutions to over $700 million, which would fund more FBI agents, prosecutors and forensic accountants. The overall discretionary budget for the Justice Department would go down less than 0.5 percent to $27.1 billion.
The proposal comes shortly after the president announced the creation of a new working group to further investigate misconduct in the pooling and sale of home loans during the financial crisis.
The proposed budget hikes, however, are a long shot.
Republicans who control the House of Representatives have questioned funding boosts for regulatory agencies as they look to cut government spending and seek to throttle the implementation of the 2010 Dodd-Frank law by starving regulators of additional funds.
Last year, both the SEC and CFTC received far less than what they had requested.
There is still along way to go in the appropriations process and this is just the opening round, said Jim Overdahl, a vice president at NERA Economic Consulting, and a former chief economist at both the SEC and CFTC.
The proposed funding increase comes as the SEC and CFTC face a daunting to-do list.
In addition to facing major work on implementing new rules to oversee the over-the-counter derivatives market, the CFTC is also straining its limited resources to conduct an investigation into the October collapse of brokerage firm MF Global and the massive shortfall in customer money.
The SEC, meanwhile, is working on a series of reforms following the May 6, 2010, flash crash while also trying to develop proposals to bolster capital formation for smaller businesses.
Both agencies are seeking to add staff and improve technology to meet the new regulatory responsibilities.
CFTC and SEC officials have warned that a lack of funding could hinder their ability to police the markets, implement new reforms and harm staffing levels.
The SEC is also still working to complete roughly 100 rules required under the Dodd-Frank Act. Those new regulations expand its authority to oversee over-the-counter derivatives markets as well as credit-rating agencies and hedge fund and municipal advisers.
In addition to the president's proposed SEC budget, Obama also on Monday called for obligating an additional $50 million into a special reserve fund created in the 2010 Dodd-Frank law that is financed with registration fees.
The money set aside in the reserve fund for 2013 would go toward modernizing the SEC's website and online database for corporate disclosure reports.
It would also be used to help the SEC develop a consolidated audit trail, or a system that would allow the agency to track all orders, messages and trades for the first time.
(Reporting By Christopher Doering and Sarah N. Lynch; Additional reporting by Jeremy Pelofsky; Editing by Neil Stempleman)