C’MON, CONGRESS, SEC NEEDS THE DOUGH

OK, Congress, how about coughing up an extra $7 million annually for the Securities and Exchange Commission to help protect investors?

Can’t afford it? Baloney!

You found billions for highways, ostensibly to keep drivers safe. You can certainly find what amounts to peanuts in a trillion dollar-plus federal budget to keep millions of investors safe.

SEC Chairman Arthur Levitt has asked for the money for “retention allowances” to stanch the brain drain from his organization, a brain drain that ultimately may harm investors.

As InvestmentNews reported last week, top-level SEC lawyers are leaving the agency for far higher-paying jobs in the mutual fund industry at a time when the industry is booming.

Demand from mutual fund companies for lawyers familiar with SEC rules and regulations governing funds is also exploding. So, too, is the commission’s need for the very same legal talent.

Demand outstrips supply — price rises.

Clearly, the feds could never compete with the mutual fund industry on salary. No Congress would vote to pay SEC lawyers more than government department heads, or even more than the president of the United States, as mutual fund companies can. Neither should Congress pay salaries comparable to the industry — the SEC provides incredibly valuable post-graduate training for many lawyers, as can be seen by the current offers from investment companies.

But Congress could narrow the gap, and that might slow the outflow. In particular, it could provide the money for the retention allowances that Mr. Levitt has asked for in his 1999 budget proposal. This would allow the chairman to offer bonuses that might induce highly valued employees with institutional memory to at least delay their departures to finish their rule-making or interpretive projects, or to pass on some of their institutional knowledge.

While it’s at it, Congress should also approve the $3.2 million Mr. Levitt has sought for additional employees to handle the flood of work the stock and mutual fund boom has brought it, and the $4.9 million he has requested for a 3% cost-of-living increase.

This is no time for Congress to be penny wise and pound foolish.

One failure of oversight, or mistake in rule making, by the SEC could cost taxpayers far more than the $15.1 million Mr. Levitt has requested.