The SEC is still understaffed

Almost two years ago I said that the U.S. Securities and Exchange Commission was underfunded and consequently, understaffed.  The Wall Street Journal has a front page story that highlights this fact, entitled, “Deadlines Missed on Financial-Overhaul Rules.”

Recall that last summer Congress passed a comprehensive reworking of the laws that govern the financial industry, popularly known as the Dodd-Frank law.  The sweeping overhaul was very, very necessary for the long-term health of the United States’ economy.  However, the implementation of the rules that are to provide the legal framework for industry and regulators to interact with one another has continuously been delayed.

The deadlines for drafting the rules are self-imposed by the various regulatory agencies.  Technically the regulators have until the summer to fully draft and then implement the rules.  Yet, they have postponed the deadlines on at least seven occasions.  The delays are attributed to massive overwhelm due to being chronically understaffed.

In fact, the Wall Street Journal states, “…the political deadlock in Congress over spending has left the SEC and CFTC operating without budget increases that the agencies have said are essential to carrying out their growing responsibilities under the law.”  In other words, the most critical regulations that stand between you and the frat boys that run Wall Street greedily is an unfunded mandate.  Nice!

The SEC and the Commodities Futures Trading Commission have both asked for an increase in their budgets to hire hundreds of new employees to implement and enforce the Dodd-Frank law.  I consider any delay in increasing the budget of the SEC and CFTC to be tantamount to capitalist treason.  Capitalism relies upon trust for buyer and seller to transact.  Without the new rules we are going to return to an environment where buyers (you and me) cannot trust sellers (Wall Street).  No trust = no deals.

Unfortunately, the gridlock in Congress is something that I have been anticipating.  Hopefully the Republicans and Democrats can find common ground on this issue.  The alternative is the “wild-west” behaviors of the real estate bubble years.  Yech!

Jason