Date: 1981-12-10
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. I a Previous order of the House. the gen-. would like to address briefly a techi- tieman from Colorado (Mr. Wiki). is cal point of major concern which Is di- recognized for 5 minutes. rectly related- to the action we am * Mr. WIRTH. Mr. Speaker. Barbara taking to day to provide funding. for S. Thomas. Commissioner of the U.S. the section 202 program In the current Securities and Exchange. Commission. fiscal year. Specifically. I am. con- has writ ten anarticle appearing In the cerned that. the existing interest rate. November 11. 1981. issue of the Na.. for section 202 loans be maintained in tional Journal. which points out the effect for the current fiscal year in shortsightedness of acrosstheboard order to insure the most efficient use budget 6uts. While. as a member of of funds being provided in fiscal year: the Budget Committee. I stronigly be1982 for this highly successful direct- lieve we must continute to reduce Fedloan program to provide housing for eral spending. acrosstheboard cuts the elderly and handicapped. Under-- make little sense.-. current law. the HUD Secretary.annu- In an article entitled "BudgetCuts" ally. establishes the interesr~rate for that. Boomerangil" Commlisioner section 202 . loans. He has the discre- Thomas noted that to cut back the tion to establish a rate which may not staff of the SEC. which is a key player exceed the average Treasury borrow- in the Nations efforts to. facilitate. Ing cost for the preceding fiscal year. capital formation. would result. insubplus a HUD administrative charge to stantial harm to the business commucover itsprocessing costs and expected nity the administration seeks to help. losses. Indeed. it may be lower as lip. The loss of confidence In the market. propriate to make tlfe program work. resulting from reduced Commission During. fiscal year 1981. the loan presence would diminish. the flow of rate. Including. HUDs administrative capitaliito the market. In addition. acharge. was established at .9% percent reduction ~in the Commissions budget for both construction and permanent wouldforce a reduction of staff devotfinancing. The Secretary Isabout to ed t io certain deregulatory and small. establish the rate of -loans made business initives and would be self-. during the current fiscal year. Rigid defeatingo. application of last years.record high The SEC has long been regarded as Treasury borrowing costs would result one of thermost effective and efficient In a 2 -percent Increase in the section of. Oovernment. agencies.: Its staff. Is 202 loan rate to a new rate of 11% pero lean. evei at. current levels. cent.. I believe- It would..mk mr Congress -resisted -the. proposed sense to retain the"9Y4percenft -interest acxos#!4eboard cuits. only to have the. rate. G..oveftment. thrown into. crisis when. Clealyriig. the interestre t "the. President vetoed the. continufig 11% percent would make i1ifeasible Irei1tIon.Ta# hopeful that. th. SEC many. section 202 projects currently. 4 iiidt~f iterreview! and that. this Congress will continue to fund It. at a level commensurate with Its responsibilities. taking into. account the growth of the trading markets and the expansion of the entities under -the SECs jurisdiction.- Commissioner Thomas article follows: BuDoEr CUTs THAT BOOMERANG (By Barbara S. Thomas) OMB has recommended that Congress adopt a 12 per cent acrosstheboard cut In the budgets of nearly all federal. agencies for the current fiscal year. The Administration apparently intends these cuts to stimulate business development. by demonstratIng its resolve to reduce the federal deficit. Ironically. however. In the case of the Securities and Exchange Commission. these budget cuts will result In substantial harm to the very business community that the Administration Is seeking to assist. In a general sense. of course. It Is widely recognized that the SECs activities are strongly supportive of legitimate business. The Commission is a key player In the nations efforts to facilitate capital formation. by virtue of its mandate to maintain the honesty and efficiency of the securities markets. A reduced Commission *presence in these markets Is likely to be reflected In an increase In market manipulation. insider trading and other forms of securities fraud.. Over the long term. such misconduct cannot help but have a detrimental effect on the publics confidence in. the integrity of.the markets. and thereby diminish severely the free flow of capital toward productive enterprises. What Is not so generally recognized Is that the Commission. although noted for Its zeal. ous pursuit of whitecollar crime. also devotes a major portion of its daily staff resources to serving the business community. The Commission. however. Is a laborIntensive agency. with a tradition of leanness and efficiency. A 12 per cent budget reduction. coming on top of a 5 per cent cut suffered In fiscal 1981 and a 3 per cent cut already scheduled to occur In 1982 will require the Commission to eliminate one in every five staff positions. These cuts will cause a dramatic reduction in the Commissions ability to continue those functions that directly serve the business community. For example. the Commissions staff annually reviews and comments upon thou-.sands of corporate filings containing proposed public disclosures that are mandated. by law. In many cases. this review brings to light significant oisasions or. misstatements before an issue of securities. reaches the market. It thereby reduces theexposure of corporations. underwriters and others to afterthefact enforcement actions by the Commission and to substantial liability in laWiuits by Individual Investors. If. the proposed cuts are enacted.. this review function will have to be curtailed sharply. As a result of existing budget constraints. the Commission already. has been forced to operate this progrsm in a lessthan~satisfactory fashion. Thus. although. the. Commission now reviews all prospectuses filed by new entrants to the securities markets. it can do no more than sampile the remainder. After the proposed. 12 per cent cut. the Commission would tie able to review only onethird of the filis from new entraxnta. and none. of thse from repeat filers In addition. the review process would be significantly lengthened. restilting In the inability of some issueri to take advantage of favorable. but rapidly changing. market conditions. --7he proposed cutbacks also. woulddeal .a severe bow to the Commssionderegula tory efforts. which. of course. directly benefit American business- Since 1978. the Commission has maintained a vigorous program to eliminate or kimplify the many rules that specify required corporate disclosures. It also has sought to allevi. 1e the burdens that Commission regulations Impose on small businesses seeking to raise capital. by creating broader and more realistic exemptions for such companies. The proposed budget reduction will necessitate a decrease in the staff devoted to these important efforts and. accordingly. delay their implementation. There is a tendency among some In the business community to rejoice at the news that one or another vexatious regulatory agency will suffer deep reductions in Its budget. It is simplistic and often erroneous. however. to equate such budget reductions with deregulation. Duplicative. needless and confusing regulations will remain on the books until the responsible agency acts to clarify or repeal them. In many cases. this will require a careful and sustained effort by a high quality staff. At the Commission. much of that staff will have to be sacrificed to the proposed budget cuts. and parts of the Commissionsderegulatory program saerif Iced along with them. The tragedy of these losses is compounded by the paucity of the savings that would be achieved by slashing the SECs budget. The Commissions entire budget for the current fiscal year Is only $83 million. nearly twothirds of which is derived from- user fees paid by those who issue or trade securities. Indeed. It- may well be possible. through modest increases In these fees. to make the Commission selfsustaining in .the near future. in a larger sense. crippling the SEC would be a tragedy reaching far beyond the immediate cost .to business and investors. The SEC Is regarded by many as a model government agency. known for its efficiency. Competence and dedication. This -reputation. and this _staff. are the product of many years of careful management and intense devotion by hundreds of people. They were not built In a day. but they could be destroyed virtually overnight..