Directing Commitees to Review Regulations from Federal Agencies

Floor Speech

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Mr. HIMES. Mr. Speaker, we have on this side spoken tonight at some length about a dangerous and poorly thought out effort on the part of the majority to underfund and gut the financial services regulatory apparatus that was established in the 1930s, which, yes, failed us in the last couple of years. And let's be clear: There is a legitimate tension between the amount of regulation which creates stability and confidence in a system and that which puts undue burden on the vigor of the private market. But this effort is wrong-headed.

Let's look at the SEC. The mission of the SEC is to protect investors. The notion that we should gut the funding of the SEC is anti-free market, it is anti-jobs and it is anti-growth, because we must protect those investors who take their savings and write a check and put it in the mail to a company in some town they have never visited, in a fund that they don't fully understand, because they know that there is a cop on the beat.

The families who write those checks, that is not just money. That money is a college education, it is a secure retirement, and they do it because they have faith. They have faith that there is a cop on the beat, that whoever takes that check is closely watched, that they are responsible and prudent. This is the fundamental aspect of our vigorous economy--that families and pension funds invest. We have efficient and vigorous capital markets because of faith.

Let's look at the lessons that have been learned in the last couple of years. It wasn't that the SEC was somehow complicit in what happened.

Yeah, they fell asleep at the switch. They didn't perform any better than a myriad of other organizations. But, if anything, the lesson is that the SEC was outgunned, underfunded, and needed help. And the effort of the majority now is to further underfund and gut that agency. It's particularly wrongheaded because the SEC pays for itself. In fiscal year 2012, the SEC will be budget-neutral. Why do this? Why risk the faith of the investors that are at the very heart of our system?

We hear a lot about uncertainty; there's so much uncertainty. Imagine the uncertainty for American families and pension funds and savers and small businesses if they need to send that check without knowing that there's a cop on the beat.

Mr. Speaker, we've seen this movie before. When the SEC was established in the 1930s, the Republicans at the time said this would be the end of capitalism. It would be the end of the free market. It would crush the U.S. economy. Instead, putting in place a well-balanced and vigorous regulatory apparatus led to 60 years of the most aggressive and intense economic growth human history has ever seen--because people had faith in the system.

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HIMES. I thank the gentlelady from California for that question.

If you look at when these regulatory bodies were established in the 1930s and you look at the volatility and the growth that happened in the next 60 years, volatility was way down and growth was way up, and the American middle class took hold because they had confidence in the system. They knew that their investor dollars would be protected.

Then we began in the early nineties, policymakers from both sides of the aisle, to dismantle that regulation, to take the referee off the field. And so we find ourselves where we are today--uncertainty, a financial crisis meltdown--at the very moment when the technology, the flash trading, the complicated securities are bewildering in their complexity.

Now is exactly the wrong time to be gutting the SEC. We do that and people lose their confidence.

Ms. WATERS. I want to ask you, is it true that the average investor--I'm not just talking about the big institutional investors, but the average investor understands the complication of this? Do they expect that we understand it and we're going to regulate it, we're going to watch out for them? What does the average investor know about the system?

Mr. HIMES. The average investor, the mom and pop, the widows and orphans funds, they're not necessarily financially sophisticated. They need somebody looking over the shoulder of those that are selling them stock, selling them bonds.

The institutional investors that you're talking about, of course, in many instances, are exempt from regulations by the SEC. They're deemed to be sophisticated, so they can participate in private placements. They can use 144(a) or reg D to make investments.

But our individual investors who are so important to this economy need somebody looking over their shoulder and protecting them from snake oil salesmen and deception and poor disclosure.

Ms. WATERS. We heard on several occasions here today the tremendous oversight responsibility given all of the capital markets that have to be monitored, that have to be regulated. What do we need to do to make the SEC stronger? We've gone through this meltdown. We've have gone through this crisis. The American people expect something to happen. What do they need in order to be good overseers, good cops?

Mr. HIMES. In a more complicated and sophisticated financial world, the SEC must be faster. It must be more efficient. It must hire people who really understand the markets. It must be more robust, and it should be held accountable. One thing it should not be and cannot be is underfunded and weak, which is what the proposal of the majority would do to it.

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