WASHINGTON (Reuters) - Republicans on a House financial panel on Tuesday said Wall Street and housing regulators need to learn to do more with less, as Washington tries to tame deficits by cutting back on spending.
The House Financial Services Committee voted to release a 19-page policy document that does not call for specific levels of cuts but singles out agencies, including the Securities and Exchange Commission, for not using resources wisely.
The document was critical of the SEC’s track record, from its failure to quickly catch frauds to past gaffes that led to wasteful spending, including $1 million on unnecessary computer equipment.
It also noted that the SEC’s budget nearly tripled over the past decade.
“Because the resources of the American people are not infinite, government officials must allocate those scarce resources wisely to fewer programs,” said the document, which was drafted by the Republican majority. “The decision to cut spending is not an easy one. But it is necessary.”
Customarily, U.S. House panels do not put forth their views and estimates for the upcoming budget year until after the president submits his recommendations. The views are not binding; however, they carry great weight with congressional appropriators in deciding annual spending levels.
This year, President Barack Obama delayed releasing his budget because Congress is confronting two critical deadlines that could lead to drastic budget cuts, and possibly a partial government shutdown.
The first deadline, March 1, will trigger automatic across-the-board spending cuts of $85 billion known as “sequestration” unless Congress agrees to an alternative.
According to White House Office of Management and Budget estimates, the SEC’s $1.32 billion annual budget could face a $108 million cut if sequestration happens.
The second crucial deadline is March 27 when the temporary spending measure to keep the government running expires. A failure by Congress to reach an accord could lead to a partial government shutdown.
Despite the lack of a presidential budget for fiscal 2014, the Republican-controlled House decided this week to press ahead with the normal course of budget season business, saying they are required to do so by law.
Democrats oppose the move, saying it is premature both without hard numbers from the president and also as the deadline for sequestration looms.
Although the House Financial Services has jurisdiction over a wide range of agencies and programs, the SEC was in the line of fire at Tuesday’s meeting.
Republicans blamed the SEC for missing the Bernard Madoff and Allen Stanford Ponzi schemes, and also for exacerbating the financial crisis by not intervening to change mark-to-market accounting rules, which critics say crippled banks holding subprime mortgage debt.
They also pointed to SEC rules they disagree with, including one provision from the 2010 Dodd-Frank Wall Street reform law that would require companies to disclose if their products contain “conflict minerals” from the Democratic Republic of the Congo.
“I think it’s kind of interesting when you look at Stanford and Madoff, it wasn’t a question that they needed more money - we just needed regulators that were actually doing their job,” said Republican Texas Congressman Randy Neugebauer.
“Obviously they ignored many of the warning signs.”
Democrats countered that the SEC desperately needs more money to do its job, especially as it works to finish rolling out all of the new Dodd-Frank rules. They said that Congress should focus on averting the cuts from sequestration.
“What do we get with an SEC that faces sequester? We get the two things that the private sector hates most: Uncertainty and delay,” said California Democrat Brad Sherman.
While Republicans were critical of the SEC on Tuesday, their policy document also indicates they could potentially be open to funding boosts in target areas.
The document calls for hiring more economists and trading specialists, noting it will help with things such as conducting economic analysis on its rules. It also supports the SEC’s efforts to expand its information technology systems.
Reporting By Sarah N. Lynch; Editing by Kenneth Barry