It’s not just that cases aren’t being adequately investigated and filed. Under Mr. Khuzami and the S.E.C.’s chairwoman, Mary L. Schapiro, the enforcement division has tried to be more proactive, detecting complex frauds before they cost investors billions. Mr. Khuzami stressed that analyzing trading patterns involves a staggering amount of data, especially the high-frequency trading that crippled markets during last year’s flash crash, and requires investment in state-of-the-art information technology the S.E.C. lacks. Sorting through the wreckage of the mortgage crisis, with its complex derivatives and millions of mortgages bundled into esoteric trading vehicles, is highly labor-intensive.

By way of comparison, in 2009 Citigroup and JPMorgan Chase, two institutions the S.E.C. regulates, spent $4.6 billion each — four times the S.E.C.’s entire annual budget — on information technology alone. Under the House’s proposed budget, the S.E.C.’s resources for technology would be cut by $10 million and a $50 million reserve fund earmarked for technology would be eliminated.

If anything, the agency’s failure to detect the Madoff scheme despite four ineffectual investigations would argue in favor of more, not less, enforcement spending. One investigation foundered when the Madoff team was abruptly shifted to mutual fund market timing, since the S.E.C. lacked the manpower to do both. An important tip got lost in the system because of inadequate tracking mechanisms. Another Madoff investigation didn’t get logged into the computer system, so one office didn’t know what the other was doing. And the most glaring problem identified by the S.E.C.’s inspector general was that investigators lacked the expertise to ask the right questions.

Mr. Khuzami said the agency had addressed all the Madoff issues that didn’t involve additional funding. But “at some point you have to develop the expertise. We’ve done some hiring, but that is threatened now.” One consequence of the proposed appropriation is “to essentially freeze hiring for 2012,” according to the S.E.C. memo.

It’s hard to believe that enforcing the securities laws — most of which long predate the recent Dodd-Frank reforms — would be a partisan issue. Yet it has sparked a fierce ideological clash, with Republicans lining up to criticize the agency and withhold funds. “Republicans are falsely invoking the deficit to effectively repeal Dodd-Frank,” Representative Barney Frank, Democrat of Massachusetts, said. “These people are ideologues.” My requests for comment to two vocal critics of the S.E.C. in Congress —Representatives Spencer Bachus, the House Committee on Financial Services chairman from Alabama, and Scott Garrett of New Jersey, both Republicans — went unanswered.

Given the magnitude of the S.E.C.’s task, Congress could make Wall Street firms pay more and not less to police the mess they helped create. A government that wants to hold wrongdoers’ feet to the fire and prevent future abuses could finance an S.E.C. enforcement surge analogous to the military’s strategy in Iraq and Afghanistan. Congress could fully finance the S.E.C.’s requested $1.4 billion — and add another $100 million for technology spending. The $1.5 billion would be paid entirely through fees. Financing the S.E.C. adds nothing to the federal deficit and, on the contrary, will help reduce it. It is an investment that would most likely generate increased fines and penalties that could be returned to defrauded investors and taxpayers.

“People say we aren’t charging enough individuals,” Mr. Khuzami said. “But we have a strong enforcement record. We aren’t acting recklessly, or operating in the gray areas, but rather bringing cases involving real frauds and misconduct and returning funds to victims. We need funding to continue those efforts, efforts that even Milton Friedman” — the noted free market economist — “conceded were an appropriate role for government.”