House Republicans this week demanded an in-depth explanation of the circumstances surrounding a report issued by The Boston Consulting Group that urges reform at the SEC. In a letter to the regulation authority, House Financial Services Chairman Spencer Bachus (R-Alabama) and Financial Services subcommittee chairman Randy Neugebauer (R-Texas) sought clarification on the role of the SEC in the drafting of the report. The conservative duo represents just a few of the many Republicans who have expressed skepticism about BCG's findings, which recommend that Congress bolster the SEC's resources or narrow the scope of its responsibilities.
The letter sent by Bachus and Neugebauer asks the SEC to detail "what editorial input, if any, the SEC had on the contents" of the BCG report, issued last week before Congress. "We seek assurances that BCG enjoyed complete independence in its work and that the final report was not subjected to substantive editorial review, deletions or insertions by the SEC," the pair wrote, clearly suggesting that the SEC altered the report in a bid to win more funding.
Bachus, who famously listed all of the "socialists" in Congress, sets his sights on BCG.
The BCG report is a byproduct of the Dodd-Frank Act. The Wall Street reform legislation called for a review of the SEC's efficiency after major abuses in the financial services industry contributed to a global economic meltdown in 2009; BCG won the contract against a host of other top consultancies in 2010.
Since it was issued last week (though several media outlets obtained draft copies earlier this month), government officials have drawn battle lines over the report's reliability. On one side is SEC Chairman Mary Schapiro, who hailed the report as a clear endorsement for improved funding for her agency, and Democrats who see a more powerful SEC as central to the fight against Wall Street corruption. In opposition are Republicans like Bachus, Neugebauer, and Scott Garrett, chairman of the Capital Markets Subcommittee (which supervises the SEC). Any increase in funding, Garret, said, "would further the mindset that our nation’s problems can be solved with more spending, not more efficiency." "Government agencies must learn to operate effectively within their budgets," he argued (a sentiment which the BCG report shares wholeheartedly).
House Republicans as a whole went even further, questioning the very purpose of the SEC. As Congress heard arguments for and against SEC reform this January, Republican leaders hung banners that read: "Can American taxpayers trust today's SEC to manage itself and do its job?" and "Is Wall Street's watchdog competent and impartial?" Barney Frank, Democrat of Massachusetts, said the Republicans' opposition to a strong SEC was politically-charged. "You have an ideological opposition to the SEC's taking on new responsibilities," he said last week.
It will be interesting to see how BCG reacts to these conservative attacks on the firm's credibility. The purpose of hiring a private sector company to review the government watchdog's efficiency was to provide an independent, apolitical perspective on a hot-button issue. For whatever reasons—either legitimate or inspired by BCG's verdict, which runs contrary to the Republicans' political stance—some Republicans believe that the review was anything but independent. The extent to which BCG publically defends itself against these charges will be a matter of some debate at the reputable strategy firm.
For more information:
Reuters: Lawmakers question integrity of Boston Consulting report
Bloomberg: SEC 'Capacity Gap' Risks Oversight Lapses as Regulator's Targets Multiply
Investment News: SEC runs into GOP wall while seeking money
Huffington Post: Spencer Bachus Makes List of 17 Socialists in Congress
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