Tag: credit ratings

Congressman Scott Garrett’s opening remarks as prepared for delivery:

Today, the Subcommittee will continue its efforts to conduct vigorous oversight of the Securities and Exchange Commission, and in particular the individual offices which make up the SEC

In the last two years, our Subcommittee has heard testimony from the directors of the Trading and Markets, Corporations Finance, Enforcement, and Investment Management Divisions at the SEC

These hearings have allowed us to take a more thorough look at the agency’s operations, rulemaking agenda, and enforcement practices so that we can better understand whether the SEC is appropriately carrying out its three-fold mission to protect investors, maintain fair, orderly, and efficient markets, and (last but certainly not least!) facilitate capital formation

So I welcome our witnesses today and look forward to hearing their testimony – I hope that between the four of you, we are able to cover a lot of ground

Back in 2000, the SEC’s operating budget was about $369 million; today, the SEC has a budget authority for Fiscal Year 2016 of a little over $1.6 billion

And the SEC has recently submitted a request to bring its Fiscal Year 2017 budget up to nearly $1.8 billion

So during much of the time when Congress has been accused of starving the SEC of the funds it needs to fulfill its mission, its budget has actually quadrupled in the last fifteen years

It would be one thing if this four-fold increase in funding coincided with an agency that has become four times as effective

Instead, we are likely to look back at this period as a time when the SEC missed some of the greatest frauds in history, was ill-prepared for the financial crisis of 2008, failed to properly incorporate economic analysis into rulemakings, and, more recently, has often times been complicit in advancing the priorities of special interests

Unfortunately, instead of addressing some of the fundamental structural issues at the SEC, the Dodd-Frank Act created more offices within the agency – two of which we will hear from today

Dodd-Frank also granted the agency vast new rulemaking authority that the SEC has often times struggled to implement appropriately

For example, while the SEC has made strides towards improving the economic analysis that underlies its rulemakings, there is still much more work to be done in this area

It’s not acceptable for the SEC to simply say “Congress made us do it” and therefore assume that a rulemaking is beneficial, as the SEC did with its “pay-ratio” rule last year

It’s also incumbent upon the SEC to clearly articulate a problem or market failure that their rules are intended to address, which should be obvious but is still unfortunately lacking in many of the Dodd-Frank rules being implemented

So I’m eager to hear about some of the steps the SEC is taking to further improve its economic analysis

I also continue to have concerns over recent rulemakings related to credit rating agencies

While there is broad agreement that certain provisions in Dodd-Frank – such as the removal of references to credit ratings in regulations – were much needed and directly address one of the causes of the financial crisis, I worry that many of the other micro-managing rules included in Dodd-Frank have had the effect of further stifling competition in the credit rating agency industry.