SEC official sees 'logic and efficiency' with merger

Market watchdog would work together well with Commodity Futures Trading Commission even without merger, chair says.

SEC Chairwoman Mary Schapiro said Tuesday a possible merger between her agency and the Commodity Futures Trading Commission makes sense, but the two agencies could work well together even if lawmakers do not combine the two market watchdogs.

Schapiro told the Senate Financial Services Appropriations Subcommittee that Congress ultimately would have to make the decision on a possible merger, but noted that she had a unique perspective since she served as chairwoman of the CFTC under the Clinton administration and before that was an SEC commissioner.

Sen. Jon Tester, D-Mont., pressed Schapiro whether investor protection would be better served with a combined agency in the aftermath of problems at both understaffed agencies. Some critics have cited examples such as the SEC's inability to detect fraudster Bernard Madoff and the CFTC not having the authority to regulate the over-the-counter derivatives markets, in which American International Group placed bets that later doomed the firm.

"My personal view is there is a logic and efficiency that can be achieved between a merger of the two agencies. But short of that, I also think the two agencies could do a better job of working together to ensure protection of investors," Schapiro said.

Even without a merger, Schapiro added, she can have a strong working relationship with CFTC Chairman Gary Gensler "to ensure that products and practices don't fall between the cracks between the two agencies, and that we don't leave large swaths of the financial markets unregulated and unaccountable to the American public."

Debate over a merger will pick up later this year as Congress begins to revamp the nation's financial regulatory structure. But proponents of such a merger will have to overcome reservations from both the Senate and House agriculture committees, whose leaders fear that they would lose jurisdiction and power over a combined agency whose focus of food commodities would be a small portion of its overall charter.

Senate Financial Services Appropriations Subcommittee Chairman Richard Durbin, D-Ill., and ranking member Susan Collins, R-Maine, said they felt the SEC has been underfunded. Even though the Obama administration has proposed an fiscal 2010 budget of $1.026 billion, a 7 percent increase from fiscal 2009, Collins warned the budget would do little to expand agency personnel because of attrition. It currently has 3,652 full-time employees. She asked Schapiro whether it would be helpful to ramp up staffing at the agency. "We can use more boots on the ground, absolutely," Schapiro said.