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.


SEC: Defective by Design? (March 2010)

10 Wall Street Expenses That Make The SEC’s Budget Look Pathetic
Halah Touryalai
Forbes Feb. 17 2011

SEC budget puts it in league with Goldman’s marketing dept.
Aaron Elstein
Crains February 14, 2011

Category: Bailouts, Corporate Management, Legal, Regulation

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.

21 Responses to “SEC Budget vs Wall Street Spending”

  1. crutcher says:

    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?

  2. number2son says:

    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.

  3. 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.

    Dave Harrison

  4. number2son says:

    And then there’s this from Matt Taibbi:

    Why Isn’t Wall Street In Jail?

  5. budhak0n says:

    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.

  6. budhak0n says:

    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.

  7. AHodge says:

    the SEC doesnt stink just because its money starved. it maybe a startover

  8. crutcher says:

    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”…

  9. NotQuiteSo says:

    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.

  10. 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!

  11. Lugnut says:

    ‘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…”

  12. NotQuiteSo says:

    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.

  13. Greg0658 says:

    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)

    you do it

  14. JimRino says:

    SEC Regulation Works under Democrats.
    SEC Regulation Does Not work under Republicans.

    Lack of SEC enforcement is a Direct Assault on Shareholder Value.

  15. DeDude says:

    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.

  16. 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

  17. bifboswell says:

    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.

    Money is perhaps half the equation; the other half is the desire and willingness of Congress and the Administration to enforce security regulations.

  18. Francois says:

    “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:

    I have argued in these pages before that delivering regulations which are comprehensive, detailed, and complex only encourages the institutions being regulated to immediately try to engineer their way around them. Simple, broad-brush regulations have a much better chance to operate as a set of principles which are well understood by both regulator and regulatee alike. But having such principles-based regulation is not enough. They must be enforced, as financial collapse in the face of a decidedly principles-based regulatory regime in the United Kingdom amply demonstrated. Not only does this mean, in Felix’s example, that regulators must have the authority to make up rules, tests, and procedures on the fly on behalf of preserving systemic stability, they must also have the balls to take that phone call from Dick Fuld. And, moreover, to tell him in no uncertain terms to go fuck himself if he doesn’t like it.

    * * *

    Now Dick Fuld, at least in his prime, was a forceful and scary man. It takes a certain kind of personality to tell such a man to go fuck himself to his face. Fortunately, we just happen to have a substantial supply of brass-balled, take-no-prisoners, kill-’em-all-and-let-God-sort-’em-out people ready to hand. By happy coincidence, these individuals also happen to be intimately familiar with the ins and outs of the global financial system, the nature and construction of the myriad securities and engineered products polluting financial markets, and the numberless tricks and stratagems large financial institutions use to end-run rules and regulations designed to keep them in check.

    These people are called investment bankers.

    That’s right, boys and girls: It’s time for the chickens to band together and hire themselves some foxes to guard the chicken coop.

    I have made this argument before. Forgive me while I indulge my present lassitude and quote myself at length:

    Many observers of the smoking wreckage which now passes for our banking system have opined that, in addition to being hobbled by a fragmented regulatory system riddled with overlapping and ill-defined responsibilities, the regulators who were supposed to be watching the chicken coop were woefully overmatched by the foxes. Staffed primarily by lawyers, on government pay scales, the SEC almost by definition is not up to the task of monitoring Goldman Sachs, JPMorgan, or anyone else, if by “monitoring” we should expect true informed oversight and control. If Harry Markopolos couldn’t get the SEC Enforcement Division to understand and investigate what appears to have been a particularly simple—if breathtakingly successful—Ponzi scheme, how can we possibly get comfortable that our government watchdogs can effectively oversee the hugely complicated, mind-numbingly sophisticated, globally distributed trading operations of a modern investment bank?

    This shortfall in regulatory intellect has been exacerbated by what the Japanese call amakudari, or “descent from heaven”: from time immemorial, a steady stream of former regulators has resigned their posts to assume positions on Wall Street, sometimes at the very firms they had been charged with overseeing. There is very little incentive to push a little harder or dig a little deeper into a question if it irritates a powerful firm that might be your future employer. Furthermore, this practice provides a steady stream of inside knowledge on current regulatory focus, practice, and ignorance that is of tremendous value to oversight-minimizing investment banks.

    The answer, of course, is obvious, if politically difficult to put into effect. Staff the SEC, or whatever “Super Regulator” the government decides to deputize to oversee this mess, with a bunch of highly-paid, tough-as-nails, sonofabitch investment bankers. You will have to pay them millions, just like regular bankers. (You can tie their incentive pay to improvements in the value of securities held under TARP and TALF, if you like.) Pay them well, and investment bankers won’t be able to treat them like second-class citizens at the negotiating table. Pay them like bankers, and your regulators won’t hesitate to read Jamie Dimon or Lloyd Blankfein the riot act, because they won’t give a shit about getting a job from them later.

    Trust me, these are the kind of people you will need on your team: highly educated, financially sophisticated, psychotically hard-working, experienced professionals who know or can figure out CDOs, SIVs, balance sheet leverage, and credit default derivatives just as easily as the idiots who created and trade this shit. Leading your enforcement and supervision teams you need a bunch of smooth, smart, plausible, grandiosely self-confident senior bankers who will not hesitate to tell Vikram Pandit to go fuck himself, his mother, and the cow she rode in on if he ever tries to fuck with the United States government, the US taxpayer, or the pizza delivery boy again. You know: psychopaths.

    This is not a new idea. For yonks, the Brits have known that the best person to hire as gamekeeper on your ancestral estate is a former poacher, someone who knows what they know, how they think, and where to punch them in the genitals to get maximum negotiating effect.

    It just requires political courage.

  19. crutcher says:

    “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…

  20. Hugh says:

    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.

  21. roxy says:

    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.