Back in November, when President Obama announced his proposal to freeze pay for non-military federal workers, I speculated a bit about the effect that might have on relatively young financial regulatory efforts:
…filling out personnel in the new financial regulatory regime created by Dodd-Frank is crucial to the efficacy of law. While the freeze might not have a huge effect on all public sector hiring, the paygap between Wall Street and agencies such as the SEC, FDIC, Fed, etc. is astronomic. Attracting talent to new government jobs will be all the harder if raises are off the table.
The problem is actually much worse. Because Democrats and Republicans failed to reach an agreement on a FY 2011 budget, those regulatory agencies have continued to receive funding at 2010 levels, which were negotiated back when the financial reform law was little more than a sparkle in Chris Dodd’s eye. Never mind the looming cuts or Republican aspirations to defund portions of the new regulatory infrastructure. The Wall Street Journal tops its story today with a tale about partisan disagreements at the Commodity Futures Trading Commission over whether they should invest in new technology or take on more staff. Between the CFTC and the SEC, they need about 1,200 additional personnel to tackle a spate of new measures called for in Dodd-Frank. But those agencies are having trouble continuing to effectively carry out old duties:
Enforcement work at the SEC is also suffering from an austerity drive, say SEC officials. A ban on nonessential travel has left a number of investigations “in limbo,” according to a person familiar with the situation. The person said that foreign bribery cases are being hit particularly hard, because of the need for overseas travel to investigate the allegations.
Complex accounting-fraud cases are also being affected by curbs on the use of expert witnesses, the person said.
House Republicans’ newly proposed budget calls for $25 million in cuts to the SEC’s budget, and slashes the CFTC’s by a third.