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Mary Schapiro Gets Tougher Treatment Regarding SEC Funding Boost

WASHINGTON— Securities and Exchange Commission Chairman Mary Schapiro defended the large budget increase sought by her agency in a hearing Thursday as she girded for tougher questioning from House Republicans later in the day on the SEC's performance and her handling of a former SEC general counsel whose mother bank rolled her money with Bernard Madoff.

Ms. Schapiro, who is engaged in a battle with congressional Republicans who are after deep funding cuts for her agency, declared a series of improvements under her watch to assert that the agency was on an upward path after an array of wrong moves, including failure to detect Mr. Maddoff’s huge fraud.

She contended the agency was at "an especially critical juncture" and there are new duties coming from the Dodd-Frank law "will require significant additional resources or a substantial reduction in the performance of our core duties," in prepared testimony before a U.S. Senate panel.

It wasn’t asked in the hearing about the amplifying contention by the way she dealt with former SEC General Counsel David Becker, who is confronting a "clawback" suit from the trustee accused with liquidating assets from Madoff's firm. Those queries are bound to come from House Republicans some of whom have debated Ms. Schapiro mishandled the matter.

Sen. Jack Reed (D., R. I.) explained to reporters, after the hearing, that the matter "deserves thorough investigation and, to her credit, Chairman Schapiro has asked for that investigation."

Replying to a reporter’s query, Mr. Reed claimed the issue of whether other SEC commissioners were notified about Mr. Becker’s inheritance of money involved in the Madoff fraud "are absolutely important questions and they have to be done quickly and publicly so the information gets out."

Nearly $1.4 billion in funding for the SEC in 2012 is what the Obama administration was after, an increase of $264 million from levels allowed for 2010, the last year of full funding. The financial increase will let the SEC to hire more than 600 new full-time staff the agency insists it needs to execute new powers to police large hedge funds, derivatives, dealers, and credit raters that it acquired in from the Dodd-Frank law.

Ms. Schapiro confronted moderate interrogation from the lone Republican on the panel, who said he acknowledged that insubstantial budgets in the past had "not allowed the SEC to effectively and aggressively do its job." However, he was "one of those who would like to see Dodd-Frank slowed down," he added.

Ms. Schapiro will get rougher treatment from House Republicans on the next hearing, who are likely to raise an array of current embarrassments for the agency to dispute that it requires to revamp its management and operations more than it requires boosted funding.