In the letter, Sens. Jack Reed, D-R.I.; Charles Schumer, D-N.Y.; Dick Durbin, D-Ill; and Robert Menendez, D-N.J., urged House leaders to work with the Senate to provide full funding in the final appropriations bill.
“The SEC is tasked with investigating financial crime and catching the next Bernie Madoff-style fraud, yet it has been chronically underfunded,” according to a release that accompanied the letter.
“With our markets and economy still struggling to recover from the worst financial crisis in 80 years, this is hardly the time to handcuff the primary cop on the beat in our financial markets,” the senators wrote. “Safe, orderly markets are a key ingredient in our economic recovery. Ever since the reforms instituted during the Great Depression, unparalleled transparency, investor protection and integrity have been hallmarks of the U.S. capital markets.”
The SEC’s chronic budget shortfalls have hurt its ability to stay one step ahead of bad actors in the marketplace, they argue. The senators note a report completed by the agency’s inspector general that found the SEC had enough evidence against Madoff to merit an investigation into the dealings of his investment firm, but the agency “simply didn’t see what was happening right in front of them.”
“The report repeatedly cites the lack of experience and expertise of the SEC personnel assigned to investigate Madoff, finding that they failed to appreciate the significance of the analysis in the complaints about Madoff and failed to follow up on inconsistencies,” according to the release. “The agency’s ability to retain experienced personnel is an ongoing problem since financial firms are increasingly able to lure the agency’s experts with higher salaries.”
The release also noted that SEC's entire budget comes from fees it collects from the industry, so fully funding the SEC would “not add a dime to the deficit.”
Last week, the House Financial Services Appropriations Committee voted to fund the SEC for the 2012 fiscal year at a level $222.5 million below the President’s budget request, despite what the senators called “the significant new responsibilities given to the SEC by Congress.”
The full text of the letter is below:
June 28, 2011
The Honorable Harold Rogers
Chairman, U.S. House of Representatives Committee on Appropriations
H-307 United States Capitol