Letter to Members of Congress Calling for an Increase in Funding to the SEC and CFTC in Order to Implement Financial Reform

Read our letter to members of Congress calling for an increase in funding to the SEC and the CFTC to provide them with the necessary resources and capabilities to implement Dodd-Frank and allow financial reform to become a reality.

Dear Member of Congress,

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.