Securities Regulation Daily SEC’s $1.6 billion budget request matches Administration’s budget proposal
Tuesday, May 23, 2017

SEC’s $1.6 billion budget request matches Administration’s budget proposal

By Mark S. Nelson, J.D. and Richard A. Roth, J.D.

The Trump administration’s 2018 federal government budget proposal is short on details about its application to federal financial services regulators. The budget, which often is thought of as a statement of an administration’s spending plans and principles, has more political than financial significance. The budget, titled "A New Foundation for American Greatness," and the accompanying "Major Savings and Reforms," include a significant explicit reference to only one regulatory agency—the Consumer Financial Protection Bureau (CFPB).

SEC budget. The budget proposal with respect to the SEC provides few details other than to eliminate the SEC’s Dodd-Frank Act reserve fund. The reserve fund would be impacted in years after 2018, according to data provided in the proposal. The reserve fund has been a frequent target of lawmakers: the Financial CHOICE Act (H.R. 10) would abolish the fund, and the latest omnibus appropriations bill (H.R. 244) rescinded $25 million from the fund.

The SEC also issued its budget request. Overall, the agency will request $1.602 billion, slightly below its enacted FY 2017 level of $1.605 billion. The fiscal 2018 request matches the amount provided for in the federal budget proposal.

The SEC noted that it plans to continue using its reserve fund to pursue technology modernization projects. The SEC also will request an additional $245 million for the General Services Administration’s competitive procurement process regarding the agency’s future headquarters. But the CHOICE Act, if enacted, also would bar the SEC from using funds to build a new headquarters.

The budget request from the SEC reiterated that the agency’s funding is deficit-neutral. This is the case because the SEC offsets Congressional appropriations by collecting transaction fees.

CFPB restructuring. One goal of the budget is to reduce the cost of complying with "burdensome financial regulations" adopted by independent agencies under the Dodd-Frank Act. Although not identified in that context, the CFPB is an independent agency the Act created.

The budget document projects that restructuring the CFPB would reduce spending by $2.9 billion by the end of 2022 and $6.8 billion by the end of 2027. It should be noted that the CFPB is funded indirectly through the Federal Reserve Board’s assessments, not through the appropriation of federal revenue. The "Major Savings and Reforms" asserts that subjecting the bureau to the congressional appropriations process would "impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism."

The "Major Savings and Reforms" notionally projects savings of $35 billion through the end of 2027 as a result of legal, regulatory, and policy changes the Treasury Department will recommend once its review is finished.

Treasury Secretary. In a statement that accompanied the release of the budget, Treasury Secretary Steven T. Mnuchin said the budget "prioritizes investments in cybersecurity, and maintains critical funding to implement sanctions, combat terrorist financing, and protect financial institutions from threats." It also would "achieve savings through reforms that prevent taxpayer bailouts and reverse burdensome regulations that have been harmful to small businesses and American workers."

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