Comes out this morning the Securities and Exchange Commission don’t have enough cash to get its ‘associates’ from Washington DC to Wall Street without them taking the bus. Horrors! A bus, not a private jet?

U.S. Regulators Face Budget Pinch as Mandates Widen

BEN PROTESS (NY Times)

Government regulators on the Wall Street beat have long been outnumbered and outspent by the companies they are supposed to police. But even after receiving budget increases from Congress last month, regulators are still falling behind.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are struggling to fill crucial jobs, enforce new rules, upgrade market surveillance technology and pay for travel.

On a recent trip to New York to tour a trading floor, a group of employees from the commodities watchdog rode Mega Bus both ways, arriving late to their meeting despite a 5:30 a.m. departure. The bus, which cost $30 a person round trip, saved the agency roughly $1,000 over Amtrak.

“We spent hundreds of billions of dollars on a hideous bailout, and now we’re not going to fund reforms to prevent another one,” said Bart Chilton, a commissioner with the agency.

The money squeeze comes as Wall Street regulators take on added responsibilities in the wake of the financial crisis, including monitoring hedge funds, overseeing the $600 trillion derivatives market and other tasks mandated by the Dodd-Frank law.

Their budgets may soon be even tighter, with Republicans looking to cut the regulators’ spending beginning Oct. 1, the start of the government’s fiscal year. Gary Gensler, the chairman of the commodities agency, and Mary L. Schapiro, the head of the S.E.C., will discuss their budgets for the 2012 fiscal year before a Senate committee on Wednesday.

It’s hard to believe the United States government is being outspent on anything, but policing the Wall Street crooks costs how much, exactly?

Some Republicans argue that the regulators’ cries of poverty are overblown. The S.E.C.’s budget this year is $1.18 billion, up 6 percent over 2010 — and nearly triple what it was a decade ago.

“A dramatic spending increase to fund the S.E.C. and C.F.T.C., as envisioned by the authors of the Dodd-Frank legislation, would further the mind-set that our nation’s problems can be solved with more spending, not more efficiency,” Representative Scott Garrett, the New Jersey Republican who leads the House Financial Services Committee’s Capital Markets panel, said in a statement earlier this year.

While hiring bans and travel restrictions have been eased since the new budget, regulators say they are largely in a holding pattern as lawmakers debate the 2012 budget. Any further cuts, they say, could undermine their efforts to police Wall Street.

The commodities agency says the uncertainty has forced it to delay some investigations and forgo other potential cases altogether.

“We don’t have the sufficient number of bodies to pursue all relevant investigations and leads,” said Mr. Gensler, adding that his agency was short nearly 70 people in its enforcement division.

Robert S. Khuzami, the S.E.C.’s enforcement chief, has similar worries, noting that some Wall Street investigations have faced mounting delays. Recent departures of lawyers will only magnify the problem, he added.

Mr. Khuzami also said he faced a “significant backlog” of tips and referrals, including in the area of market manipulations and accounting irregularities. The tips, which come from whistle-blowers, law enforcement agencies and investors, often prompt S.E.C. investigations.

“The biggest concern is we’re not going to get to fraud and wrongdoing as early as we should,” he said. And if the agency’s budget is not increased in 2012, the S.E.C.’s enforcement division “won’t cast as wide a net,” he added.

Already, the S.E.C.’s enforcement division has adopted cutbacks. The division, for instance, has curbed its use of expert witnesses in some securities fraud trials, Mr. Khuzami said.

The division also started sending only one lawyer — sometimes a junior staff member — to conduct depositions and interview witnesses, according to defense lawyers and people close to the agency. Senior S.E.C. lawyers monitor the depositions via videoconference.

I somehow doubt Congressman Garrett has any plan to enhance the SEC’s efficiency, but he has a point. Why is enforcement taking the brunt of the cuts?

Keep in mind that SEC costs are a fraction of what big- business spends on lobbyists.

It’s not just the SEC. Data collection by the Energy Information Agency is being curtailed for budget reasons:

EIA budget cuts to curb some energy data gathering

David Bird (MarketWatch)

A 14% cut in the final 2011 fiscal year budget from the year earlier will force the Energy Information Administration to cut back some energy data and analysis, EIA Administrator Richard Newell said Thursday.

Widely followed weekly reports on oil and natural gas inventories aren’t affected.

The budget provides $95.4 million for the EIA, the independent, analytical and statistical wing of the Department of Energy, a drop of $15.2 million from the fiscal year 2010 level.

“The lower FY 2011 funding level will require significant cuts in EIA’s data, analysis, and forecasting activities,” Newell said. “EIA had already taken a number of decisive steps in recent years to streamline operations and enhance overall efficiency, and we will continue to do so in order to minimize the impact of these cuts at a time when both policymaker and public interest in energy issues is high.”

EIA said the budget cut means it will “cancel the planned increase in resources to be applied to petroleum data quality issues.”

Initial moves including stopping preparation and publishing of the 2011 edition of the annual data release on U.S. proved oil and natural gas reserves and curtailing efforts to understand links between physical energy markets and financial trading.

EIA will also suspend reporting on the market impacts of planned refinery outages, halt collecting monthly state-level data on wholesale prices for petroleum products and suspend auditing of data submitted by major oil and natural gas companies reporting on their 2010 financial performance.

Collection of data from natural-gas market companies will be reduced, along with moves to collect data from smaller companies in EIA oil and natural gas surveys.

EIA said it will “terminate updates” to its international energy statistics, including halting preparation for the 2012 edition of the International Energy Outlook.

Annual published inventories of emissions of greenhouse gases in the U.S. won’t be published, and EIA will be forced to “limit responses to requests from policymakers for special analyses.”

Here’s another example: the EPA is curtailing radiation monitoring across the US. It appears to believe that the Fukushima calamity is ‘solved’ by TEPCO’s brilliance (from George Washington’s Blog):

EPA Stops Daily Monitoring of Radioactivity … When We Need It More Than Ever.

EPA writes today:

Due to the consistent decrease in radiation levels across the country associated with the Japanese nuclear incident, EPA will update the daily data summary page only when new data are posted.

After a thorough data review showing declining radiation levels related to the Japanese nuclear incident, EPA has returned to the routine RadNet sampling and analysis process for precipitation, drinking water and milk.
In fact, radiation levels are not decreasing, and top independent scientists are calling for increased monitoring.

Indeed, Marco Kaltofen – a well-known environmental engineer – stresses that more monitoring has to be done so that we can assess the risks, and take appropriate action:

It’s hard not to be cynical about the intentions of the establishment. Data provision and enforcement activities send messages that run contra to the ‘happy- happy news’ emitted constantly by the establishment’s over- funded public relations departments. The government cannot crack down on fraudulent practices it cannot see because it cannot hire enough lawyers. Denying the ability of citizens to come to their own conclusions about peak oil by cutting off the flow of data is of a piece.

The attempt to throttle outcomes implies that reality can be manipulated. It’s another version of the ‘Key Man’ strategy which endeavors to prop up all systemically essential institutions at any cost. Systemically important now means organized thievery and misinformation: we seem to be scraping the bottom of the ‘systemic’ barrel.

Wall Street firms will break the law, the consequence will be another run out of Wall Street securities. Peak oil is in the past and world is living the consequences regardless of whether the establishment wishes to face the truth or not.

Meanwhile, the silver market has seen tremendous volatility over the past week:

Silver, Gold Futures Dropping as Soros Reported to Have Sold

Chanyaporn Chanjaroen (Bloomberg)

Silver futures fell, heading for the biggest three-day drop since 2008, and gold also retreated amid a report Soros Fund Management LLC sold precious-metal assets.

Soros Fund Management sold some holdings because of a reduced risk of deflation, according to the Wall Street Journal, which cited unidentified people close to the matter. Michael Vachon, a spokesman for Soros, declined to comment. The fund held shares in the SPDR Gold Trust, the biggest exchange-traded product backed by gold, and the iShares Gold Trust (IAU) at the end of 2010, U.S. Securities and Exchange Commission filings show.

Silver futures fell as much as 5 percent to $40.465 an ounce on the Comex exchange in New York. The contract was at $41.72 as of 6 a.m. local time, for a three-day decline of 14 percent. Margin requirements were raised 38 percent in since April 26. Gold futures retreated 0.2 percent to $1,537 an ounce.

“Some small, speculative players had to trim their silver positions as they couldn’t afford to pay for such margins,” said Jerome Berset, a portfolio manager at Palaedino Asset Management SA in Geneva, which has 1 billion euros ($1.49 billion) in assets and has maintained holdings in gold and silver. “For long-term players with fundamental views, this may be a good time to get in for both silver and gold.”

The decade-long bull market in gold and silver attracted fund managers from Soros to John Paulson and spurred central banks to add to their reserves for the first time in a generation. Investors in exchange-traded products backed by gold accumulated more metal than all but four central banks, while silver holdings are equal to more than eight months of global mine supply, according to data compiled by Bloomberg.

I don’t understand the ‘reduced deflation risk’ argument. There are no hedges against deflation. In deflation, silver loses value along with all other assets relative to currency. Granted, some assets lose less value than others, which is deflation’s charm.

There is no doubt that Soros represents ‘smart money’, someone who knows when to cash out of a bubble.

Something that has to take place is for the paper and physical markets to be brought into balance. The metals futures markets have become mostly margin markets. The massive increase in leverage makes these markets useless for price discovery, even as the (paper) increase forces up the bubble price. I guess the CFTC’s employees cannot afford to take the bus so as to monitor the exchanges … or to properly set position limits.

These markets have large paper derivative overhangs. There are more contracts and options on contracts posted for delivery than there is the actual, physical good available. One consequence is that large positions are held by very few participants both long and short. These positions cannot possibly be hedged properly. It is hard to see how does this state of affairs benefits anyone, even the large position holders. If the market turns against them they will be subject to squeezes. Size itself is no defense when you need to sell and there are no buyers … or vice- versa: see Floyd Norris’ ‘Porsche Reinvents the Short Squeeze’.

Bloomberg notes that central banks have switched from being net sellers to net buyers of precious metals. This switch by itself accounts for the increase in metals prices, the banks being inundated with all kinds of debt instruments and foreign exchange. The answer to why central banks hold gold and silver in reserve when all the world’s currencies are based on national economies’ borrowing ability, the answer is ‘why not’?

Otherwise, it is hard to detect any special prescience on the part of central bankers who are unable to grasp simple concepts such as ‘asset price bubbles’ and ‘peak oil’.

Here’s a silver chart, from TFC Charts:

This is the front month, electronic session, which has been seeing the selling activity after- hours. The big drop a couple of days ago took place in about ten minutes, which should instruct everyone how dangerous all ‘computerized’ markets currently are. There simply is no to time to escape an adverse market or close out a losing position without experiencing devastating losses.

Unlike gold, which has limited industrial use, silver is a commercial metal used in engineering, electronics, photography, as a catalyst, as a disinfectant as well as for coins and jewelry. The ramp in price since the beginning of the year renders silver too valuable to use (waste) in ordinary commercial operations. One way to look at the demand for silver is that a significant group of market participants are measuring the commercial value of silver against its monetary value.

In a post- peak world monetary gold and silver is a component of de- industrialization.

As for the idea, “too valuable to waste” consider petroleum. Petroleum has little value if it cannot be wasted (used industrially). As the cost of petroleum rises — measured against money/credit — its monetary value increases. When it becomes too valuable to waste, industry becomes the ‘loser’. The cost then falls due to demand destruction … but the cost relative to what industry waste can service is still too high. What then?

The inflection point where industry cannot support the price of oil production is uncertain along with the price threshold. This would be a price too low to support the low energy- return on investment technologies such as shale- oil ‘fracking’, ultra- deep- water drilling or steam flooding of oil fields. It is possible that the costs are now rising faster than the market oil price rises to pay for them!

The outcome of this dynamic is a sharply contracting amount of oil available at any price.

No wonder the EIA is cutting off data. Soothing lies are so much more pleasant.