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Regulators: Budget cuts would harm oversight of Wall St. reforms

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Federal regulators on Thursday said budget cuts proposed by the House would hamper their ability to enforce new Wall Street rules under the Dodd-Frank Act.

“I think the public has to understand what the limitations are of a regulatory regime that has no compliance or enforcement behind it,” said Mary Schapiro, chairwoman of the Securities and Exchange Commission, testifying before the Senate Banking Committee at a hearing marking the one-year anniversary of the law signed by President Obama.

The Republican-led House passed a budget last spring that would trim about $10 million from the SEC’s information technology budget and enact 15 percent budget cuts on the Commodity Futures Trading Commission, the regulator charged with writing new rules for the derivatives market.

Heads of financial oversight agencies have complained about the spending cuts, saying they can’t carry out the demands of the Wall Street reform bill. Passed in the wake of the 2008 banking crisis, the massive legislation aims to insert more accountability and transparency into the financial system.

Under the new mandates, the SEC must modernize the EDGAR data-gathering system and more closely oversee hedge funds, over-the-counter derivatives and other financial products — all tasks that will be difficult to perform under budget cuts, Ms. Schapiro said.

“We’ve said repeatedly we won’t be able to institutionalize the Dodd-Frank rules,” she said. “Our capacity to keep up with that kind of volume on a declining budget will be severely impacted.”

Rule-writing will continue, but at a much slower pace, said CFTC Chairman Gary Gensler. He also worried that a shortage of manpower in the agency would harm its transparency goals.

“I fear then we won’t have the people to answer the questions, to have the transparency, to aggregate the market and put it out on our website,” Mr. Gensler said. “Public market transparency needs the resources.”

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