February 14, 2011 / 7:43 PM / 9 years ago

UPDATE 3-Obama boost to CFTC, SEC faces Republican fire

* SEC fiscal 2012 budget up 28 pct under Obama plan

* CFTC would see budget up 82 pct to $308 million

* House Republicans have proposed cuts to both agencies

* Republicans bash proposed CFTC user fees (Adds details on budget and proposed new staffing levels)

By Sarah N. Lynch and Christopher Doering

WASHINGTON, Feb 14 (Reuters) - The White House proposed on Monday large funding increases for U.S. market regulators, a move already coming under fire from Republicans who oppose key provisions in the Dodd-Frank financial reform law.

The Obama administration’s fiscal 2012 budget proposes giving the Securities and Exchange Commission a 28 percent funding increase to $1.427 billion compared to fiscal 2010’s actual spending levels. That includes an additional $20 million the SEC could spend out of a new emergency account that would be funded by registration fees.

The Commodity Futures Trading Commission would see an 82 percent spending jump to $308 million, but $117 million of that total would be offset through a user fee on financial firms that is unlikely to draw support in Congress.

“The so-called user-fees would be one more tax to drive up the cost of main street businesses,” said Republican Congressman Scott Garrett, the chairman of a House panel overseeing the implementation of new derivatives regulations. “They represent one more end-around to attempt to grow government even more, and done in this way, it would be outside the traditional congressional appropriations process.” <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ INSIDER: Brookings’ Doug Elliott on funding


GRAPHICS r.reuters.com/nek97r


Take a Look-Obama’s 2012 budget [ID:nN11152338] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Dodd-Frank was enacted last year in response to the 2007-2009 financial crisis, drawing support almost exclusively from Democrats.

U.S. regulators have said they will need more funding to write and enforce dozens of rules required by Dodd-Frank, including authority to oversee the $600 trillion over-the-counter derivatives market as well as hedge funds and private equity funds.

Republicans who now control the House of Representatives have questioned funding boosts for regulatory agencies as they look to cut government spending and seek to throttle enforcement of Dodd-Frank by starving regulators of additional funds.

Congress did not enact a 2011 budget before the November elections, leaving government budgets frozen at 2010 levels. Congress has to agree by March 4 on continuing funding for the government for fiscal 2011, which ends Sept. 30.

Republicans proposed late on Friday cuts to spending for the remainder of the current fiscal year, with the CFTC hit particularly hard.

House appropriators said they wanted to slash $56.8 million from the CFTC’s current funding of $168.8 million for 2011, while the SEC’s would be lowered $25 million from the current level of $1.1 billion.

The Republican plans have drawn the ire of Democrats, including Barney Frank, the top Democrat on the House Financial Services Committee and co-author of Dodd-Frank.

Frank told Reuters last week he thinks withholding funding from the SEC and CFTC will fuel public anger, and possibly put pressure on Congress to come through with the money. “I think ultimately, both agencies will be funded,” he said.

The budget freeze has begun to affect day-to-day operations at the agencies, forcing them to curb travel for employees and delay hiring staff.

Obama’s proposal would let the SEC hire a total of 780 new staffers, 468 of which would be tasked with implementing Dodd-Frank provisions. The CFTC, meanwhile, would be able to hire 238 full-time staffers to implement Dodd-Frank and another 78 to carry out its remaining responsibilities.

On Monday, several key regulators including SEC Chairman Mary Schapiro and CFTC Commissioner Bart Chilton lauded the president’s proposal.

“These funds will provide the SEC with the resources needed to carry out both our longstanding core mission as well as our new responsibilities for derivatives, hedge fund advisers and credit rating agencies,” Schapiro said in a statement. Chilton added in an interview with Reuters that the budget presents an “admirable equilibrium” that shows fiscal restraint while still giving regulators much-needed resources.

The SEC, through fees it charges the securities industry, has consistently been a net contributor to the government’s coffers, but Congress has set its annual budget.

A provision in Dodd-Frank requires the SEC to adjust fees it charges on securities transactions so they will offset the amount Congress appropriates starting in 2012. That means its budget would not add to the U.S. deficit.

Still, not all regulators appeared happy on Monday with the president’s plan. CFTC Commissioner Scott O’Malia, a Republican, said he opposes a user fee. He also said he is concerned the budget focuses too much on hiring new staff instead of putting the money into much-needed technology upgrades. (Reporting by Sarah N. Lynch and Christopher Doering; Graphics by Emily Stephenson; Editing by Tim Dobbyn)

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