How many scandals have to occur before SEC enforcement gets a decent budget?

Sigh. We talked about this over a year ago:  Congress cuts S.E.C. budget. Its not getting any better, and new regulations requires more enforcement.

Why is this important? After the 1929 crash, the widespread perception was that the game was fixed, the government was in cahoots with the investment trusts, and the public did not stand a fair chance.

An entire generation of investors left the markets — for good. It took until 1954 to get back to breakeven from market highs in 1929. That’s a full generation later.

We are risking a similar investor exit. The lack of adequate enforcement, despite the many, many scandals, means we are inviting another generation to toss up their hands in frustration and bail. A perception can develop that Commodoties and Real Estate offer the same upside — but without the corruption.

This is potentially a huge negative on the sentiment side. I’d be curious if any polling has been done asking individual investors their thoughts on how fair they thought the corporate environment is and whether an individual stands a fair chance in the stock market.

Everyone hates losing, but its part of life, and of playing a game. But if the perception becomes that the game is fixed or the refereres are corrupt, well, that becomes a very different issue.

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Source:
SEC Says Budget Proposed by Bush To Slow Its Hiring
SIOBHAN  HUGHES
WSJ, March 14, 2005; Page B2
http://online.wsj.com/article/0,,SB111057917207577453,00.html

Category: Markets, Politics

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

5 Responses to “SEC Budget Insufficient for New Hires”

  1. bhaim says:

    Here’s a LA Times poll from March 2004:

    “Have corporate scandals in this country made you more willing or less willing to invest in the stock market, or have corporate scandals not played a role in your investing in the stock market one way or the other?”

    More Willing 6%
    Less Willing 37%
    Not Played a Role 31%
    Don’t Invest 23%
    Don’t Know 3%

    N=1,616 adults nationwide. MoE ± 3.

    http://www.pollingreport.com/business.htm

  2. chris says:

    You should look at the numbers carefully. The SEC budget grew in 2002 (FY03), 2003 (FY04), and was essentially static last year (FY05). Actually, there are well staffed and have a lot a leeway in there budgeting. The problem is a lack of sound resource allocation. They don’t need more money or staff, just better management.

  3. dd says:

    Perhaps the rapid changes in financial engineering, markets, and innovation have made the SEC a bit player in the new dynamic. Could the corporate scandals have been prevented if the SEC had the same regulatory power over derivatives that it has over securities and the securities markets? Could the timing scandal have been prevented if the SEC had the same regulatory power over hedge funds as it does over mutual funds? Just asking.

  4. Hey Chris,

    You are technically correct, but your arguments are disingenuous in the extreme.

    1) Sarbanes-Oxeley massively increased enforcement requirements of the SEC. Doing twice as much with the same budget mean less dollars/[personnel per enforcement action. Hence, this is effectively a cut.

    2) The SEC has been a perennially underfunded department, with antiquated tech and low morale (under both Clinton and Bush). They needed a massive increase years ago, and are way behind

    3) A static budget in the face of an increasing population is essentially a decrease.

  5. Chris says:

    Fair enough. I concede the points. I enjoy your site. Cheers.