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Regulating the Regulators: The Executive Branch and the SEC, 1981-2008

An Independent Agency

Budget Challenges

"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."
- June 24, 2015 Interview with James McConnell

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

Footnotes:

(10) June 2, 2016 At the Crossroads of the White House and the SEC

(11) June 24, 2015 Interview with James McConnell; November 13, 2005 Interview with Barbara Thomas Judge

(12) June 2, 2016 At the Crossroads of the White House and the SEC; June 24, 2015 Interview with James McConnell; June 2, 2004 Harvey L. Pitt

(13) July 27, 2012 Interview with Jonathan Burks; June 24, 2015 Interview with James McConnell;

Related Museum Resources

Papers

March 20, 1980: SEC Authorizations for Fiscal Years 1981, 1982 and 1983 - Hearing before the House Subcommittee on Consumer Protection and Finance of the Committee on Interstate and Foreign Commerce
image pdf (Courtesy of David Morf)
April 6, 1981: Letter from Robert H. Davenport, SEC Regional Administrator - Denver, to Colorado Senator Ruth S. Stockton opposing cuts in funding for the Colorado Division of Securities
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 1981: Letter from SEC Chairman John S.R. Shad to David A. Stockman, Office of Management and Budget, concerning the impact of budget reductions on the SEC
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 14, 1981: Memo from SEC Chairman Shad to all Commission staff members concerning proposed Fiscal 1982 budget reductions
transcript pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 27, 1981: Letter from John C. Whitehead, Goldman, Sachs & Co., to Senator E.J. Garn, opposing SEC budget cuts
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 27, 1981: Letter from U.S. Representative Geraldine A. Ferraro to SEC Chairman Harold Williams, seeking information on impact on SEC of budget cuts
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
October 28, 1981: Letter from Ralph DeNunzio and Edward O'Brien, Securities Industry Association, to U.S. Representative Neal Smith, opposing SEC budget cuts
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 2, 1981: Letter from Senator Paul Laxalt to John C. Whitehead
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 4, 1981: Letter from A.A. Sommer, Jr., Morgan Lewis & Bockius, to David Stockman, opposing SEC budget cuts
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 4, 1981: Letter from Senator Christopher J. Dodd to John C. Whitehead
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 9, 1981: Letter from Senator John Heinz to John C. Whitehead
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 20, 1981: Memo from SEC Executive Director George G. Kundahl to SEC Division Directors, Office Heads and Regional Administrators on Commission Activities during the Weekend of November 21-22, 1981
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
November 23, 1981: Memo from SEC Executive Director George G. Kundahl to SEC Staff concerning Commission Operations during Period of the Absence of Appropriations
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
December 4, 1981: Letter from Senator Ted Stevens to John C. Whitehead
image pdf (Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
September 28, 1983: Memo to Charles Kolb from Kenneth Fogash on SEC contingency plan on expiration of appropriations
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample memo if expiration at midnight
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample memo if expiration on Friday or Saturday
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample memo to division directors, office heads and regional administrators
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample memo to staff of Commission operations
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample notification to employees not required to report
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
September 28, 1983: SEC contingency plan on expiration of appropriations: sample notification to employees required to report
transcript pdf (Courtesy of George Bush Presidential Library and Museum)
March 21, 1985: Statement of SEC Chairman John Shad on 1984 results and 1986-1988 budget authorization before the U.S. House of Representatives Subcommittee on Oversight and Investigations
image pdf (Courtesy of David B.H. Martin)
May 13, 1987: Statement of SEC Chairman John Shad concerning the SEC's authorization request for fiscal years 1988-1990
image pdf (Courtesy of National Archives and Records Administration)
December 11, 1987: Letter to U.S. Senator William Proxmire from SEC Chairman David Ruder on SEC budget concerns
image pdf (Courtesy of National Archives and Records Administration)
April 13, 1988: Protest to U.S. Senator Ernest Hollings from SEC Chairman David Ruder on SEC appropriations
image pdf (Courtesy of David S. Ruder)
August 19, 1988: Response to U.S. Representative John Dingell from George Kundahl with SEC budget data
image pdf (Courtesy of David S. Ruder)
January 17, 1989: Letter to U.S. Senator Donald Riegle from SEC Chairman David Ruder with SEC self-funding study
image pdf (Courtesy of David S. Ruder)
April 6, 1989: Statement of SEC Chairman David Ruder to U.S. Senate Subcommittee of the Committee on Appropriations on SEC 1990 budget
image pdf (Courtesy of David S. Ruder)
April 18, 1989: Oral Statement of SEC Chairman David Ruder before the U.S. Senate Committee on Securities concerning SEC's authorization request for fiscal years 1990-92
image pdf (Courtesy of David S. Ruder)
February 1995: SEC Budget Estimate Fiscal Year 1996
image pdf (Anonymous)
June 28, 2001: Testimony Concerning Appropriations for Fiscal Year 2002 - Laura S. Unger, SEC Acting Chair
image pdf (Courtesy of Kathryn McGrath)
April 17, 2002: Testimony Concerning Appropriations for Fiscal Year 2003 - Harvey L. Pitt, SEC Chairman
image pdf (Courtesy of Kathryn McGrath)

Oral Histories

27 July 2012 Jonathan Burks With Dr. James Stocker

edited transcript (pdf)

13 November 2005 Barbara Thomas Judge With Dr. Kenneth Durr

edited transcript (pdf)

24 June 2015 James McConnell With Dr. William Thomas

edited transcript (pdf)

Programs

02 June 2016

At the Crossroads of the White House and the SEC (Seventeenth Annual Meeting)

Moderator: Kurt Hohenstein

Presenter(s): Richard Breeden

edited transcript (pdf)

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