February 1, 2010 / 4:47 PM / 10 years ago

UPDATE 2-Obama budget boosts market regulators' funds

* SEC budget up 10 pct under Obama plan

* CFTC budget up 28 pct under Obama plan

* Plan includes funding for financial reforms (Adds CFTC comment, detail on SEC budget, paragraphs 3, 6)

WASHINGTON, Feb 1 (Reuters) - The White House proposed giving market regulators more funding to police Wall Street as the government works to hold accountable those responsible for the worst financial crisis in decades.

Under the Obama administration’s proposed fiscal 2011 budget, the Securities and Exchange Commission would receive a 10 percent increase in funding and the Commodity Futures Trading Commission’s budget would increase by 28 percent.

“This budget recognizes the deep need for regulators to have the appropriate tools to guard against fraud, abuse and manipulation,” said CFTC Commissioner Bart Chilton.

The sizeable increases represent a departure from the deregulatory atmosphere under President George W. Bush.

The White House proposed nearly $1 billion in additional funds for various regulators, contingent on Congress passing legislation to reform U.S. financial regulation.

That includes $24 million for the SEC to regulate the over-the-counter derivatives market and advisors to hedge funds and other private pools of capital.

The administration’s proposal also allots funding for the housing department and Federal Trade Commission to help establish the Consumer Financial Protection Agency — a key piece of the Obama administration’s financial reform proposal.

A placeholder of $857 million has been set aside to give the Federal Deposit Insurance Corp starting money to resolve any failing financial firms that pose a systemic risk. Those funds are contingent on Congress passing legislation that gives the FDIC “resolution authority” for large, troubled firms and authorizes the agency to recoup any costs through risk-based assessments on financial firms.

Obama’s budget proposal needs congressional approval and lawmakers usually make many changes.

NEW FINANCIAL RULES IN LIMBO

Congress is attempting to sharpen regulators’ powers through a large package of reforms, including the creation of a systemic risk regulator, enhanced policing of derivatives, the formation of the new consumer agency, and consolidation of bank regulators, among other reforms.

The budget plan highlighted Obama’s proposed bank bailout tax as a way to further the administration’s financial reform goals “by providing a check against the risky behavior that contributed to this crisis.”

Last month, Obama proposed a fee on financial firms with more than $50 billion in assets to ensure all taxpayer costs for the financial bailout are covered.

Some Wall Street firms have characterized the tax as unfair because a large portion of the losses are expected to come from the automakers and from insurer AIG (AIG.N).

Under Obama’s budget proposal, the SEC, which oversees financial players and equity markets, would see its budget increase to $1.234 billion from the estimated 2010 allotment of $1.12 billion. Much of the proposed funding would go to increasing staffing levels by 10 percent to just under 4,200 employees.

The SEC’s enforcement division and examinations office, criticized for missing Bernard Madoff’s epic fraud, would each receive a budget increase of nearly 10 percent.

The CFTC, which oversees trading in financial, energy, agricultural and metals futures, would see its budget increase to $216 million from $168.8 million. Most of the increase would pay for new information systems and an additional 119 employees. For more stories on the Obama budget please see TAKE A LOOK [ID:nN30164446] (Reporting by Rachelle Younglai, Tom Doggett, Karey Wutkowski; editing by Matthew Lewis and Tim Dobbyn)

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