SEC Budget vs Wall Street Spending
The White House has proposed that the Securities and Exchange Commission should get a 28% budget increase for fiscal year 2012 to $1.4 billion.
Lots of Wall Street sycophants have criticized this number, including members of the House of Representatives — they want to slash the proposed SEC budget by nearly 30%.
Last moth, Halah Touryalai put the $1.4 SEC billion budget into context, comparing it versus the following Wall Street spendings:
1. Bank of America spent over $2 billion on marketing in 2010.
2. JPMorgan’s litigation reserves: $4 billion (Q3 2010)
3. Goldman Sachs Q4 2010 compensation and benefits: $2.3 billion
4. Note that Goldman Sach’s $550million fine last year was about HALF of the SEC’s proposed budget.
5. JPM spent $1.2 billion in Q4 2010 on technology, communications and equipment expenses.
6. As a reward for Bank of America’s purchase of Merrill Lynch’s rotting carcass, the government gave it a $20 billlion TARP loan.
7. Citi’s marketing and advertising cost the bank $1.6 billion in 2010.
8. The SEC now must regulate hedge funds, manage their registration, etc. In Q4 2010, the hedge fund industry added $149 billion in new assets.
9. AIG recieved loans, guarantees and bailouts worth $185 billion dollars.
10. Cheers! Americans spent $4.7 billion on beer, wine and liquor in the month of December 2010.
As we have noted many times in the past, the SEC has been kept defective as a matter of policy.
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Previously:
SEC: Defective by Design? (March 2010)
Sources:
10 Wall Street Expenses That Make The SEC’s Budget Look Pathetic
Halah Touryalai
Forbes Feb. 17 2011
http://blogs.forbes.com/halahtouryalai/2011/02/17/10-wall-street-expenses-that-make-the-secs-budget-look-pathetic/
SEC budget puts it in league with Goldman’s marketing dept.
Aaron Elstein
Crains February 14, 2011
http://mycrains.crainsnewyork.com/in_the_markets/2011/02/sec-budget-puts-in-league-with-goldmans-marketing-dept.php
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March 9th, 2011 at 8:28 am
While in principle many people, including myself, would like to see stronger oversight and regulation of financial markets, we have to ask ourselves ourselves if this increase is going to actual work or just to people being paid to jerk off at the office. I wish that was a joke.
Isn’t it political will rather than money that’s the real problem?
March 9th, 2011 at 8:36 am
crutcher, it’s both political will AND resources. Crap, I have plenty of will to clean up Wall Street. But, dang it, I don’t have any lawyers, guns or money to get the job done.
It’s really quite grotesque that the Republicans are using the SEC’s ineffectiveness as an excuse to further reduce their ability to enforce the law.
March 9th, 2011 at 8:46 am
Barry:
It’s not going to be a problem. They’re going to fund the SEC with points instead of dollars. They got the idea from the CFTC position limits non-rule rule. Heck, the Fed’s even considering it; points instead of dollars. It will just be easier once we can all get on the same global points system. Maybe Facebook or Zynga can oversee the accumulation of virtual social capital. You’ll like it… trust me.
http://tradewithdave.com/?p=4791
Dave Harrison
http://www.tradewithdave.com
March 9th, 2011 at 8:55 am
And then there’s this from Matt Taibbi:
Why Isn’t Wall Street In Jail?
March 9th, 2011 at 9:18 am
It’s a completely useless agency. If we could get away with it, we shouldn’t fund it at all.
Simply an arm of political patronage that contributes nothing of any value whatsoever.
Yes there’s plenty of examples of this in our current government structure but if you’re truly looking for cuts, just do away with the SEC .
It’s pretty useless.
March 9th, 2011 at 9:20 am
Oh and the longer and longer I read and listen to Taibbi, the more thoroughly convinced I become that although he may have started out with the noblest intentions, in reality, the guy is clueless and his anger leads nowhere.
March 9th, 2011 at 9:32 am
the SEC doesnt stink just because its money starved. it maybe a startover
http://washingtonexaminer.com/blogs/beltway-confidential/sec-whistleblower-wins-wrongful-termination-case
March 9th, 2011 at 10:14 am
Alright, number2son, I’ll agree that money might be part of the problem, but surely it can’t be wrong to expect that the agency in question actually demonstrate a willingness to do its job before requests for additional funding be approved…
The nation was glued to the TV for weeks over Clinton’s blowjob, but the MSM apparently couldn’t care less about the SEC’s similar “diversion”…
March 9th, 2011 at 11:17 am
The author of this piece later noted in a comment, “The flip side of that argument is that the on a budget of $900 million or less, the SEC managed to get a big heads up on Madoff but didn’t execute any worthwhile investigation. Goes to show you dont need a $1.4 billion budget to get the biggest whistleblower tip of your life.”
Funding is important. Management and accountability are more important.
March 9th, 2011 at 11:20 am
Whatever we can do to let the banks have free run is important!
No regulations, cut the SEC budget, no cop on the beat.
Free market rulez!
March 9th, 2011 at 11:48 am
‘Halah Touryalai put the $1.4 SEC billion budget into context…’
quite poorly too, unless by ‘context’ you mean comparing to mostly unrelated things.
Make no mistake, I’m not for cutting their budget, but I wonder if, with an increased budget the SEC could now purchase a ‘will to prosecute criminals’. Is that a budget line item we can fund better, cause right now it seems to be marked down to zero.
“It takes brass balls to sell real estate gentlemen…”
March 9th, 2011 at 11:52 am
Almost no one wants banks to have free run – we saw how that turns out. Almost everyone wants a cop on the beat. The difficult question is what do we do with a deeply flawed agency, one with spectacular failures in the recent past. It is fair to ask whether more funding alone solves the problem. Mary Schapiro says she has taken many steps to reform the SEC. And in the context of that world, she has. In the context of the real world – or at least the world in which I move – well, no, she hasn’t. No one at the SEC has been fired over Madoff, and SEC officials mixed up in Madoff have gone on to lucrative private sector careers where they sell their services lobbying the SEC itself, right up on up to the Commissioners themselves. Is this reform? Does more funding turn this agency into an effective cop?
Imagine a different set of facts in the last two years. Imagine the SEC fired and then barred staff involved in the disastrous CSE program, in Madoff, in Stanford, and in ratings agency fiascos. Imagine an SEC dedicated to becoming more numerate, replacing at least some of its armies of lawyers with data analysts and empirically driven economists…
But we have to wake up from that and see what’s actually happened. So far as we know, no one’s been fired. As for replacing lawyers with analysts and economists, the SEC eliminated its Office of Economic Analysis in 2009, lost its Chief Economist six weeks before the Flash Crash, lost its Deputy Chief Economist a few months after the Flash Crash, and has yet to replace either of them. Perhaps that’s because it doesn’t have the funding, but isn’t it bizarre for a financial industry and economic regulatory agency to go without a Chief Economist for, at this point, nearly a year?
The SEC’s woes are too many for a blog comment. We want a cop, a real cop. This agency has a long way to go, and funding is only one part of a more difficult and complicated answer. The SEC is widely – and in my view, rightly – perceived as having lost its legitimacy because of astonishing incompetence. When government loses legitimacy, it usually needs to be replaced. The SEC can start recapturing its legitimacy by very publicly cleaning house.
March 9th, 2011 at 11:57 am
evil flourishes when good men do nothing (I think thats how it goes)(by some forgotable)(I should look it up)
Milton Friedman on Donahue 1979 (1/5)
http://www.youtube.com/watch?v=E1lWk4TCe4U
you do it
March 9th, 2011 at 12:54 pm
SEC Regulation Works under Democrats.
SEC Regulation Does Not work under Republicans.
Lack of SEC enforcement is a Direct Assault on Shareholder Value.
March 9th, 2011 at 1:04 pm
How about we let them keep the money they collect in fines, and give them bonuses for every bankster they manage to send to jail. That would give them incentives to work hard and do the right thing and it would save the public money. A small o.01% fee on any and all trades would make sure that the people paying for the SEC are not the taxpayers.
March 9th, 2011 at 1:21 pm
You need the budget and tools or you can’t get the job done.
Since this comes up all the time, I have to throw a penalty flag. A few eejits goof off, out of a regulatory and legal firm that is outgunned and out-manned by Wall St, and the response is cut their budget?
Has anyone ever quantified how much productivity is lost in corporate America to Facebook, p0rn, twitter and blogs, etc ? How normal or aberrational is the SEC?
I find it to be a bullshit issue raised by bankers– not serious regulatory critics
March 9th, 2011 at 1:25 pm
It is pointless to separate the the SEC from the ideology of the Administration and it’s appointees to the SEC. George Bush, by his own admission, was proud of a generally anti-regulatory viewpoint of the business world. Two of the three appointees (Pitt and Cox-served a total of six years) were outspoken in their belief that the SEC was too aggressive.
George Bush as you may recall had his own brush will securities fraud when he was on the board of Harken Energy.
Does anyone really believe that George Bush, Harvey Pitt of Christopher Cox was exhorting the SEC to get out there and “bust heads”? Also don’t forget that in the wake of 9/11, the FBI (and probably the Secret Service) diverted resources to anti-terrorism efforts from white-collar crimes. The New York Times article (though not entirely clear) states that as of 10/2008, the number of agents working white collar crimes had been reduced by 40% from the 2001 numbers; similarly the number of investigations and convictions have also plummeted.
http://www.nytimes.com/2008/10/19/washington/19fbi.html?pagewanted=all
Money is perhaps half the equation; the other half is the desire and willingness of Congress and the Administration to enforce security regulations.
March 9th, 2011 at 6:25 pm
“The difficult question is what do we do with a deeply flawed agency, one with spectacular failures in the recent past.”
As usual, the difficult question is political in nature; unworkable regulations and personal that is totally outgunned by those you’re supposed to regulate. But, there are solutions to that:
http://epicureandealmaker.blogspot.com/2010/03/poachers-turned-gamekeepers.html
It just requires political courage.
March 9th, 2011 at 10:01 pm
“A a bullshit issue raised by bankers” – really? I’ll grant your point that facebook, you tube etc. are also be huge time wasters (for bored workers with inept management, anyways) but does it really make sense that an issue is bullshit just because it’s raised by someone you don’t like?
I’m not a banker and I’m genuinely angry that the issue has not been dealt with publicly. The SEC needs more money? Fine – but not before addressing the problem, which as your know BR is not just about jerking off on the job but a decade at least of nonfeasance. There’s no better metaphor for what the SEC’s been up to than what was actually going on…
March 10th, 2011 at 3:43 am
In money the 28% increase is $300MM. What’s their shopping list? Do the items on the list make sense? Will they buy improvements in market function?
Comparisons to the US beer tab aren’t much help in answering these questions.
March 10th, 2011 at 2:35 pm
A good way for Congress to cut at easy Billion from the budget is to have the SEC collect their budget through fees on the industry they regulate. The Nuclear Regulatory Commission gets 90% of their budget from licensing fees on the nuclear industry and the Patent and Trademark Office is self-sustaining through their application fees as well. I don’t see why an industry that rakes in the kind of profits that the financial industry does is not made to fund their regulatory agency as other industries do.