There’s an amusing story on the SEC from the New York Times out today. Republicans are cutting its budget back to 2010 levels after a short increase this year in preparation for the 2012 budget. While a deficit hawk might think that sounds somewhat reasonable or at least justifiable considering the government’s recent focus on deficit reduction, the SEC’s situation is unique because it is one of Washington’s few revenue producing agencies. It pays all of its own expenses with the amount it brings in through fees and fines on Wall Street financial firms and even has some left over, which can then be used to pay down the national debt.
In the past, the SEC has brought in more than double its annual budget, paying down the debt and providing payments to victims of financial fraud. Cutting its budget at a time when its authority is expanding rapidly under Dodd-Frank seems counter-productive. The Times explains further:
But cutting the S.E.C.’s budget will have no effect on the budget deficit, won’t save taxpayers a dime and could cost the Treasury millions in lost fees and penalties. That’s because the S.E.C. isn’t financed by tax revenue, but rather by fees levied on those it regulates, which include all the big securities firms.
A little-noticed provision in Dodd-Frank mandates that those fees can’t exceed the S.E.C.’s budget. So cutting its requested budget by $222.5 million saves Wall Street the same amount, and means regulated firms will pay $136 million less in fiscal 2012 than they did the previous year, the S.E.C. projects.
Moreover, enforcement actions generate billions of dollars in revenue in the form of fines, disgorgements [repayment] and other penalties. Last year the S.E.C. turned over $2.2 billion to victims of financial wrongdoing and paid hundreds of millions more to the Treasury, helping to reduce the deficit.
This is of course, just another example of how government works against the people’s most basic interests to protect the banks and other Wall Street firms who as we know contribute more directly to political candidates than any other industry. By cutting the SEC’s budget, the congress is actually increasing the deficit. In addition, what purpose could forbidding the SEC from imposing fines beyond its budget possibly serve except for the obvious benefit to financial institutions committing fraud.
This kind of activity goes beyond simple ignorance. This is probably the most obvious example of outright corruption in Washington today, since properly supporting the SEC would benefit enforcement of the law and the budget deficit, which we’re told is so important.
