"People in the agency had a hard time understanding. We’re an independent agency, but no, we weren’t independent from a budget standpoint. We were part of the President’s budget, and we were competing for resources all the time."
The SEC regularly dealt with budget challenges, in part to the wish of the predominantly Republican Administrations to reduce the size of government. But in the case of the SEC, cutting the budget meant cutting staff. Richard Breeden remembered, “One element of the Reagan Administration was severe budget issues during those times; agencies didn’t just get no increase, they actually had rollbacks. The Commission as I recall had about a 25% cut in its budget. When you cut the Commission’s budget, you’re cutting people.”10
SEC Chairmen were expected to support the President’s budget. John Shad “had to say that the SEC can do well in this budget. Reagan was making huge cuts everywhere, so the SEC was going to take its cut.” Shad’s fellow Commissioners protested the cuts, to Shad’s dismay. “I remember writing articles that said, 'There’s a lot of fat in the government and in the independent regulatory agencies but not at the SEC. This is a really important regulatory agency, and if you cut staff, you’ll cut our effectiveness.' [Shad] didn’t like that. He wasn’t about to offend the Reaganites.”11
Some Chairmen were able to secure budget increases. Richard Breeden, with his previous White House service, could make the case to President George H.W. Bush for more funding. William Donaldson was able to secure extra resources from the George W. Bush Administration. One budget success for the SEC was the establishment in 2002 of pay parity for staff. Commission leaders had worked since the 1980s to provide more realistic SEC salary levels, in light of disparities between SEC salaries and the salaries of other financial regulatory agencies, as well as between the SEC and the private sector.12
The goal of an independent budget for the SEC was less probable. “Asking for an independent funding stream would have been something that would have required coordination with the White House. That was probably not something that was likely to get a favorable reception.” Like other agencies, the SEC budget was tied to how effectively it used the resources it received; as James McConnell noted, “That’s a common thing in Washington. If you don’t do better, you’re going to lose your budget.”13
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