A follow-up on Quote of the Week

Given Charles Ferguson and Matt Taibbi's complaints about the lack of prosecution of bank fraud in the wake of the financial crisis, I don't think either of them will be too pleased to read this item from the Big Picture blog (emphasis mine).

If you can’t stop the legislation, you can defund it.

That is what our Chart of the Day shows, the net impact of defunding regulation. As we previously discussed 1 year ago (SEC: Defective by Design?), there has been a concerted effort at keeping regulators under-funded. The SEC has lacked sufficient staff, thus holding enforcement efforts to a minimum.

This is not an accident. Imagine being allowed to have an army and guns, but no bullets are allowed. The banks and big Wall Street firms are very comfortable with this arrangement. And as Matt Taibbi made clear, the revolving door between the SEC and Wall Street has prevented any criminal prosecutions.

And its not a bi-partisan issue this go around, its the crazy wing of the Republican Party:

“Congressional Republicans intent on big spending cuts are on a collision course with Wall Street’s top regulators over a plan to slash millions from agency budgets.

Lawmakers are targeting the Commodity Futures Trading Commission and the Securities and Exchange Commission. The work of both agencies is set to balloon as the Dodd-Frank financial reform law is implemented...

The most recent comprehensive spending bill produced by House Republicans would chop the CFTC’s funding by $56.8 million — almost a third of the agency’s entire budget — over the next seven months. Funding at the SEC would be cut by $25 million over the same time period.”

To give you an idea of what this looks like, consider the chart [below] — it shows how the SEC caseload has risen, while its budget remains flat.

Good stuff. If you read me often, you know that I'm all about balancing the budget and reducing our deficit and debt. But this isn't where to start with the cuts, as I made clear in this post. The core job of the federal government by any definition is to set the rules by which the rest of the country plays. Therefore, "balancing the budget" by defunding regulatory agencies is akin to balancing a police department budget by firing officers and no longer responding to criminal complaints, or balancing a fire department budget by letting fires burn themselves out--what's the point?

[Big Picture]