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Published: December 2010

Agencies need adequate funds to fufill financial reform legislation

Coalition: Financial reform

In coalition with an extensive list of organizations, Consumer Action asked Congress to ensure that the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are adequately funded so that they can meet the mandates of the financial reform legislation that passed this year.

Below is the full text of the letter:

As Congress moves to finalize plans to fund the federal government for fiscal year 2011, Americans for Financial Reform urges you to include the increased funding for the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as recommended by the House and Senate Appropriations Committees.

Earlier this year, Congress adopted landmark legislation to rein in financial industry excesses and restore safety and stability to our financial system, legislation that Americans for Financial Reform strongly supported. Now the massive job of implementing the legislation to ensure that it achieves its promise has passed to the regulatory agencies. Those agencies will be unable to fulfill that mandate unless Congress meets its responsibility to provide these agencies with the necessary resources. The cost of funding these agencies is negligible compared to the cost to the financial markets and the broader economy of another financial crisis.

Two agencies in particular are in jeopardy: the Securities and Exchange Commission and the Commodity Futures Trading Commission, since neither has a stable funding source independent of the congressional appropriations process.

The SEC was suffering from inadequate funding before passage of the Dodd-Frank Act greatly expanded its responsibilities. That under-funding, while not solely responsible for the agency’s regulatory failures during the financial crisis, was clearly a contributing factor. Now the SEC has been given expansive new responsibilities, not just to conduct the many studies and adopt the many rules required under the Act, but also to create a new office to oversee credit rating agencies and to assume responsibility for oversight of securities-based swaps, as well as hedge funds and private equity funds. Giving the agency new responsibilities without providing the funding to fulfill them effectively is a prescription for regulatory failure. Having turned aside the SEC’s self-funding request in favor of a dramatic increase in the agency’s authorized funding, it is incumbent on Congress to show that it can fulfill its responsibility by providing the agency with the appropriations that turn that authorization into a reality.

The CFTC is a tiny agency that has been given regulatory responsibility for a vast over-the- counter derivatives market. Among other things, the agency is charged under the Dodd-Frank Act with reviewing swaps to determine which are required to clear, enforcing business conduct and implementing disclosure requirements to improve market transparency. Just as reckless swaps and derivatives trading played a critical role in the financial crisis, turning the fallout from the crash of the domestic housing market into a global economic catastrophe, effective regulation of these markets is critical to restoring safety and stability to the financial system. For the CFTC to provide that effective oversight, it must receive a significant new infusion of funds.

Americans for Financial Reform urges you to complete the job of financial regulatory reform by adopting fiscal year 2011 funding levels for these two agencies that will serve as a signal that Congress is serious about giving the agencies the resources they need to carry out dramatically increased responsibilities. Failure to adhere to the schedule of increased appropriations authorized under Dodd- Frank will make it impossible for regulators to fulfill their responsibilities under the Act, effectively sabotaging the vital work Congress has done to rein in the casino economy.

Lead Organization

Americans for Financial Reform

Other Organizations

Americans for Financial Reform | AFL-CIO | AFSCME | Arizona Consumers Council | Arkansas Oil Marketers Association, Inc. | California Reinvestment Coalition | Center for Digital Democracy | Consumer Assistance Council | Consumer Federation of America (on behalf of their state and local groups) | Communications Workers of America | Council of Institutional Investors | Empire State Petroleum Association | International Brotherhood of Teamster | Maryknoll Office for Global Concerns | Neighborhood Economic Development Advocacy Project (NYC) | National Association of Consumer Advocates | National Latino Farmers & Ranchers Trade Association | New York Oil Heating Association, Inc. | New Jersey Citizen Action Oil Group | New Mexico Petroleum Marketers Association | Petroleum Marketers Association of America | Privacy Rights Clearinghouse | Public Citizen | The Colorado Wyoming Petroleum Marketer | The Institute for Agriculture and Trade Policy | U.S. PIRG

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