U.S. House Republicans proposed on Tuesday spending cuts for the federal commodities regulator and only a modest increase for the securities regulator, prompting outrage from Democrats who pointed to JPMorgan Chase & Co's $2 billion trading loss as a prime case for greater funding.
The House Appropriations Committee's fiscal 2013 spending package would slash the Commodity Futures Trading Commission's annual budget by about $25 million to $180.4 million.
The Securities and Exchange Commission, meanwhile, would see its 2013 budget rise by about $50 million, to $1.37 billion from $1.32 billion, according to the Republicans' proposal.
Both budgets are well below the targets that President Barack Obama had proposed for the SEC and CFTC, with both agencies finalizing numerous new regulations required by the 2010 Dodd-Frank Wall Street oversight law.
"The result of the House bill is to effectively put the interests of Wall Street ahead of those of the American public by significantly underfunding the agency Congress tasked to oversee derivatives - the same complex financial instruments that helped contribute to the most significant economic downturn since the Great Depression," CFTC Chairman Gary Gensler said on Tuesday.
A spokesman for the SEC declined to comment.
The unveiling of the proposed SEC and CFTC budgets comes a day before banking regulators are due to appear before the Senate Banking Committee where they will face questions on their oversight of JPMorgan. The bank revealed last month that it had suffered at least $2 billion in losses on complex trades that started as hedges but grew into a risky bet.
JPMorgan Chief Executive Jamie Dimon is due to testify before Congress next week.
The bank's trading involved credit-default swaps, the same type of derivative blamed for playing a role in American International Group Inc's near-collapse during the financial crisis.
SEC Chairman Mary Schapiro and Gensler have both said their agencies are probing issues related to the loss. They have also said that because not all of the Dodd-Frank derivatives regulations are complete, they did not have a full window into the risky trades.
Norm Dicks, the ranking Democrat on the House Appropriations Committee, said the Republicans' spending plan emphasizes a "self-regulatory approach" to Wall Street.
"Recent press stories have reported that (the) CFTC would be using its new authority under Dodd-Frank Act for the very first time to investigate the record trading loss at JPMorgan," he said in a statement. "This investigation is a timely example of why the law was necessary and why the agency should be fully funded."
House Republicans, who are critical of many provisions in Dodd-Frank, have been seeking to use funding cuts as a way to starve regulators of resources and slow down the implementation of the law.
More recently, the CFTC has also come under fire for its oversight of the collapsed brokerage MF Global.
While the CFTC has borne the brunt of Republican efforts to slash funding, the SEC has managed each year since the crisis to win spending increases.
That may be due in part to the fact that the agency's budget is offset by industry transaction fees, and does not contribute to the U.S. deficit.
The appropriations subcommittees that oversee the SEC and CFTC will consider the spending bills on Wednesday.
In addition to the proposed budgets for the SEC and CFTC, the House Appropriations Committee is also proposing to change the funding structure for the newly-created Consumer Financial Protection Bureau.
Under the plan, the CFPB would no longer be funded by the Federal Reserve, and instead would have its budget appropriated by Congress starting in 2014.
Critics of the new CFPB, which was created by the Dodd-Frank law to protect consumers from unfair credit-card practices and predatory lending, have complained the bureau should be more directly accountable to Congress.