* Rep. Bachus could support funding boost for SEC
* SEC seeking $1.407 billion for fiscal 2012
* Many House Republicans oppose boosting funding
* SEC says it needs money to implement Dodd-Frank (Rewrites to include comments from Spencer Bachus)
By Sarah N. Lynch
WASHINGTON, Sept 15 (Reuters) - A key U.S. House Republican expressed support on Thursday for bolstering funding for the Securities and Exchange Commission, a sentiment that diverges sharply from those of fellow Republicans critical of the agency's expanding powers.
"Some of my colleagues have argued, and I think with some persuasion, that with their expanded role there is a need for an immediate funding increase," said House Financial Services Chairman Spencer Bachus about his Democratic colleagues. "My personal view is that an increase in funding is probably necessary as part of the reform process."
Bachus' surprising comments came at the start of a House Financial Services hearing to scrutinize the SEC's operations due to its light regulatory touch in the lead-up to the financial crisis and its failure to detect Bernard Madoff's Ponzi scheme.
Republicans have also been critical of the extra responsibilities the SEC received in the Dodd-Frank Wall Street overhaul law, and have raised concerns about how well the SEC and other regulators are analyzing the economic impact of their proposed rules.
Under Dodd-Frank, the SEC gained new powers to regulate hedge funds, credit-rating agencies, municipal advisers and the nearly $600 trillion over-the-counter derivatives market.
The SEC is under fire for several other scandals, and is bracing for an onslaught of what are likely to be unflattering reports by the agency's inspector general looking at everything from document destruction to potential conflicts of interest by the SEC's former general counsel David Becker.
Other Republicans on the panel Thursday sounded far less open to boosting the agency's funding, even though the SEC has argued that the fees it imposed on Wall Street firms would offset the money appropriated by Congress.
"We have to be very careful here of rewarding bad behavior with more money and more regulations," said Congressman Randy Neugebauer, a Republican from Texas.
Bachus's openness to a funding increase for the SEC could help pave the way for negotiations between the U.S. House and Senate as they work toward a fiscal 2012 budget plan.
In June, the House Appropriations Committee refused a request by the Obama administration to raise the SEC's 2012 budget by about $222 million from its current funding level of $1.185 billion, instead opting to leave it flat. That bill is now awaiting approval by the full U.S. House.
The Senate Appropriations Committee, meanwhile, is slated later on Thursday to vote on a very different proposal that would give the SEC its desired increase.
SEC Chairman Mary Schapiro, in testimony before the House Financial Services Committee on Thursday, said the plan that House appropriators have put forward would have damaging consequences for the agency.
She said the agency needs resources to be able to conduct exams of clearinghouses for compliance with new derivatives rules. She also said a tight budget could force the SEC to decline to prosecute wrongdoers if the litigation costs looked too high. (Reporting by Sarah N. Lynch; Editing by Lisa Von Ahn and Gerald E. McCormick)