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President Shows Support for SEC, CFTC

Under President Obama’s recently released fiscal 2017 budget, the SEC would see an 11 percent increase to $1.8 billion. The CFTC would see a 32 percent increase to $330 million. The increases are part of a plan to double the SEC and CFTC budgets by 2021 from fiscal 2015 levels. The proposed increase for the CFTC comes at a time of scrutiny for accounting errors that caused KPMG to withdraw almost a decade of financial opinions.

According to a blog post from Jeffery Zients, the Director of the National Economic Council and Assistant to the President for Economic Policy, the proposal “also reflects continued support for legislation to enable funding the CFTC through user fees like other Federal financial and banking regulators.” Zients argues that “[f]or years, Congress has fallen short when it comes to providing the appropriate resources to the agencies tasked with keeping investors, markets, and consumers safe.”

The budget also includes a proposed “new fee on large, highly-leveraged financial institutions.” Institutions with assets over $50 billion would be subject to a seven basis point fee on liabilities under the plan. The administration estimates that the fee would generate $111 billion over 10 years and argues that “[b]y attaching a direct cost to leverage for large firms, this fee will reduce the incentive for large financial institutions to use excess leverage, complementing other Administration policies aimed at preventing future financial crises and making the economy more resilient.” Zients suggests that the fee is a way to further reforms implemented since 2008 and to “ensur[e] that taxpayers aren’t on the hook for risky Wall Street gambles.” Kenneth Bensten, president and CEO of SIFMA, pushed back, arguing that “[t]he imposition of a special, sector-only tax on the vast array of financial institutions captured by the president's proposal under the guise of further limiting excessive risk completely ignores the changes this administration, Congress, regulators and industry have implemented.”

However, the President’s move is largely symbolic as the House and Senate have begun budget negotiations without holding a customary hearing with the Director of the Office of Management and Budget to discuss the President’s proposed budget. The Chair of the House Budget Committee said that “[r]ather than spend time on a proposal that, if anything like this Administration’s previous budgets, will double down on the same failed policies that have led to the worst economic recovery in modern times, Congress should continue our work on building a budget that balances and that will foster a healthy economy.”