By Sarah N. Lynch
WASHINGTON (Reuters) - The Securities and Exchange Commission should not get a budget boost until it dedicates its existing resources to reforming its internal operations, two key House Republican lawmakers said on Wednesday.
"The SEC has not undertaken a serious, objective self- examination of the way it does its job," said Republican Congressman Scott Garrett, who chairs the House Financial Services capital markets subcommittee that oversees the agency.
"Some will suggest the solution to this...is more funding. That is one position I would vehemently disagree with at this point."
Garrett's comments before an audience at the U.S. Chamber of Commerce come at a critical moment for the agency, which is still hoping for approval of a big 2012 budget increase to help pay for the implementation of nearly 100 new rules required by the 2010 Dodd-Frank Wall Street overhaul law.
Democrats and Republicans are locked in a dispute over taxes and spending that has jeopardized the passage of a spending bill to keep the government operating beyond Friday.
It is still unknown what the final figure for SEC spending will be. House lawmakers have sought to keep the agency's budget flat at $1.185 billion amid frustration with provisions in the Dodd-Frank law, the agency's past missteps with conducting economic analyses of its rules and the SEC's debacle in missing Bernard Madoff's massive Ponzi scheme. Senate lawmakers are seeking to boost the SEC's budget to $1.407 billion.
Congresswoman Jo Ann Emerson, a House Republican who chairs an appropriations subcommittee in charge of the SEC's budget, said an agreement for the SEC budget had been reached, but she declined to provide the number. She too echoed Garrett's sentiment that reform at the SEC must come first.
"I think they have to prove that they can reform before they get any more money," she told reporters on the sidelines of the U.S. Chamber's event on Wednesday.
Some of the kinds reforms that Republicans would like to see implemented at the SEC were outlined in a new report at the U.S. Chamber on Wednesday.
That report, drafted by former SEC Secretary Jonathan Katz, calls for a major overhaul of the SEC's structure, rule-making process and enforcement procedures.
Concerned that the chairman of the agency has far too much to manage alone, the report calls for dubbing one commissioner a deputy chairman in charge of management and operations,
It also seeks to expand the number of commissioners from five to seven and diversify the skillset of commissioners to include accountants and economists.
The report also urges the SEC to improve its cost-benefit analysis process for rulemaking, an area that has dogged the SEC over the years. In July, a federal appeals court tossed out a rule that gave shareholders more power to nominate directors to corporate boards after judges said the agency did not properly weigh the rule's economic impacts.
Under Katz's plan, the SEC should start cost-benefit analyses earlier in the process and let those findings drive policy-making. He also calls for an economic look-back after a rule is implemented to ensure it has the desired effect.
Garrett said improvements to the SEC's cost-benefit analysis process as well as the addition of more economists on staff are among the reforms he wants to see happen first.
The agency has argued that Congress should not worry about raising its 2012 budget because it will be offset by fees on the industry and will not impact the U.S. deficit, but Garrett said that argument does not sway him.
"Any time you are taking money out of the economy, it affects the economy," he said.
(Reporting By Sarah N. Lynch, editing by Dave Zimmerman)