* Congressional inaction delays Dodd-Frank implementation
* SEC, CFTC face funding squeeze
* Federal Reserve, FDIC not affected
By Andy Sullivan and Roberta Rampton
WASHINGTON, Sept 29 The Obama administration
may have to wait several months to implement parts of the
landmark Dodd-Frank financial reform law because Congress has
yet to approve funds necessary for its implementation.
Requested funding increases for financial regulators are
not likely to be included in a stopgap spending bill to fund
government operations through early December, complicating
efforts to put the sweeping law in place, according to
congressional and regulatory sources.
The delay is likely to last through early December and
could stretch into 2011.
Congress must pass the temporary spending bill by Friday
because it has not passed any of the 12 regular bills that fund
government operations for the fiscal year that begins on that
day. Senators were still negotiating the final shape of the
stopgap bill as of midday on Wednesday.
The squeeze would be particularly tight for the Commodity
Futures Trading Commission and Securities and Exchange
Commission, the two agencies which will begin oversight of the
$615 trillion over-the-counter derivatives market.
The CFTC had been expecting a 50 to 70 percent boost to its
$169 million budget to hire more than 200 new staff and upgrade
its outdated technology to take on its new mandate. A funding
shortage would also hurt its ability to audit traders and
travel for enforcement cases. A prolonged delay could crimp the
CFTC's regulatory ambitions, CFTC Commissioner Jill Sommers
told Reuters. [ID:nN28117151]
The SEC was also expecting an increase of 18 percent. SEC
Chairman Mary Schapiro has said the agency needs to hire 800
new employees as part of its effort to write dozens of new
rules and conduct multiple studies under the law.
"It is simply pathetic how Congress passes all these
prescriptive rules and regulations, and then fails to
adequately fund the agency on a continuing basis," said Greg
Mocek, a former CFTC enforcement chief.
Because Congress rarely finishes its spending bills on
time, federal agencies routinely must wait weeks or months for
money to launch new programs that have already been approved.
Congress is expected to take up the funding bills when it
returns after the Nov. 2 elections, but lawmakers could opt for
further delay if they do not pass all 12 bills before the
temporary funding measure expires on Dec. 3.
Republicans, who overwhelmingly opposed Dodd-Frank, are
poised for significant gains in the elections and could win
control of both chambers of Congress.
That could further complicate the funding fight, as they
promise sharp spending cuts and could try to block the
requested funding increase to slow the law's implementation.
Democratic Senator Dick Durbin, who heads the subcommittee
that sets funding levels for financial regulators, said they
should be able to staff up over the next several months even
without an increase in their budgets.
"I don't think they are falling behind in terms of hiring
people to meet these new responsibilities," Durbin said.
The top Republicans on the banking committees in both the
House and the Senate have said they would try to repeal parts
of Dodd-Frank if they won control of Congress.
Republican Senator Richard Shelby, who would chair the
Senate Banking Committee, declined to say whether he would
oppose an increase in SEC funds to carry out Dodd-Frank.
"We need to see what their plans might be," he told
The landmark law aims to prevent a recurrence of the
2007-2009 financial crisis by curbing risky trading by banks
and creating a new government watchdog to protect consumers.
The funding fight would not affect several other agencies
that will implement the law, as they are not dependent on
Congress for funding.
The Federal Reserve pays for its operations primarily
through investments and fees, while the Federal Deposit
Insurance Corporation and the Office of the Comptroller of the
Currency are funded by assessments. The Office of Thrift
Supervision, which would be dissolved under Dodd-Frank, also
would not be impacted by the funding delay.
(Additional reporting by David Clarke and Christopher Doering;
Editing by Eric Walsh)