Republican lawmakers want Wall Street’s smallest regulator to shed some more pounds.
In a House appropriations bill released this week, Republicans slashed the Commodity Futures Trading Commission’s budget by 14 percent, to $180 million, roughly $128 million below what President Obama had sought. The proposed cut comes as the agency is charged with writing dozens of new rules for Wall Street.
Now, one of the agency’s most prominent alumni is coming to its defense.
Brooksley E. Born, the trading commission’s chairwoman under President Clinton, joined Democratic lawmakers in Washington on Friday to highlight the case for a bigger budget at the agency.
“The C.F.T.C. is a small agency with enormous responsibility,” Ms. Born said, according to prepared remarks, adding that the agency “is desperately in need of additional funding.”
Under the Dodd-Frank regulatory overhaul law, the agency must devise more than 50 new rules governing derivatives, a central cause of the financial crisis.
Barney Frank, the co-author of the overhaul law and the lawmaker who hosted the event with Ms. Born on Friday, noted that the collapse of MF Global had also drained resources from the agency. Despite the added burdens, the Democrat from Massachusetts noted, the agency’s budget had grown only 10 percent since Ms. Born led the agency.
The proposal from the House appropriations committee, which is only a preliminary plan subject to change as it moves through Congress, would most likely prompt layoffs at the agency.
“They want to bring us back to the days of underregulated financial markets and the conditions that led to the Wall Street bailout,” said Representative Steny H. Hoyer of Maryland, the Democratic whip of the House, who also attended the event on Friday. “Ms. Born, he said, is “here today to warn us again that, if we erode the S.E.C. and C.F.T.C.’S ability to do their jobs, we’ll find ourselves right back where we were in 2008.”
Washington has ignored Ms. Born’s warnings in the past.
More than a decade ago, she sounded alarms about increasing threats in the swaps industry, a dark corner of the derivatives industry. Lawmakers and Treasury Department officials dismissed her warnings and exempted the now $700 trillion market from oversight.
The exemptions paved the way for the American International Group and other Wall Street firms to pile into the market, ultimately leading to the need for billions of dollars in bailouts.
“The failure to regulate over-the-counter derivatives has already cost the country so much,” Ms. Born said on Friday. “We must learn from this tragedy to avoid repeating it.”