WASHINGTON (Reuters) - Republicans in the new Congress could put the budget squeeze on two powerful regulatory agencies to slow President Barack Obama’s crackdown on Wall Street.

Snow covers a street sign at the corner of Wall St. and Broad St. in New York's financial district, February 10, 2010. REUTERS/Brendan McDermid

A Democratic-controlled Congress pushed through the Dodd-Frank bank reform laws last year and regulators were counting on a big budget boost to police the $600 trillion over-the-counter derivatives market -- blamed for much of the excess behind the 2007-2009 financial crisis.

But the last Congress failed to deliver on the funding, and that will be even harder to obtain with Republicans vowing to cut spending as they take control of the House of Representatives and boost their rolls in the Senate.

Republican say they want to review the expansion plans of regulators. “Once you turn the money loose, it’s a little harder to stop that train,” said Representative Randy Neugebauer of Texas, who will head the House Financial Services oversight subcommittee.

Before lawmakers agree to dole out funds for the Securities and Exchange Commission and the Commodity Futures Trading Commission, Republicans want more time to study whether the spending is warranted, Neugebauer told Reuters.

The delay could give a reprieve to big Wall Street players ranging from Goldman Sachs to BlackRock who, through their lobby groups, have been pressing regulators to slow their furious pace to impose a new rule book on the financial sector called for by the reform law.

Republican Representatives Spencer Bachus, the incoming chairman of the financial services committee, and Frank Lucas, the incoming chairman of the agriculture committee which oversees the CFTC, also wrote to regulators urging delay in the rules-making process.

“An overarching concern ... is the need to get it done right, not necessarily get it done quickly,” they said.

The SEC was expecting an increase of 18 percent to its budget for fiscal 2011, which began on October 1, to begin hiring the 800 new employees it needs to enforce the Dodd-Frank law, named after the Democrats who negotiated the reforms, Senator Christopher Dodd and Representative Barney Frank.

But lawmakers have so far been unable to agree on overall government funding, and have held the government’s budget static at 2010 levels, until at least March.

IMPACT ON SEC

“We will have to take some more steps to cut back,” SEC Chairman Mary Schapiro said in an interview last month. “At this stage, it will impact our work.

The CFTC, chronically underfunded and understaffed, was looking for a 50 percent increase to its budget, which included plans to hire about 240 people in 2011 to begin enforcing its new oversight of the swaps market.

“We may not get more dollars, so what are we going to do next? What’s our Plan B?” said Scott O’Malia, a Republican commissioner on the CFTC, in an interview on Monday.

Chairman Gary Gensler has said the CFTC will need to hire at least another 160 people in fiscal 2012. Obama will make his budget request for the upcoming fiscal year in February.

“I do think without sufficient funding next summer (2011) you’d see a significant number of registrants -- swap dealers, swap execution facilities and so forth -- whose legitimate applications would have to be slowed down,” Gensler told Reuters in an interview last fall.

In contrast, the Federal Deposit Insurance Corporation will have an easier time hiring 156 new staff needed under Dodd-Frank to monitor large banks and other financial companies because its funding comes from fees assessed on industry.

The CFTC and SEC have been working flat-out to write more than 100 technical regulations required to implement Dodd-Frank.

Regulators, however, are not expected to rein in the initial design of their rules due to the current funding squeeze.

“I just don’t think they’re going to pull punches on the chance they don’t get fully funded,” said Michael Greenberger, a law professor at the University of Maryland and the CFTC’s former director of trading and markets.

But if they don’t get more money by their July deadlines, the agencies will need to pick and choose what rules to enforce.

“If the funding doesn’t come through within a reasonable period of time, I think that both the CFTC and the SEC are going to be hurt in implementing Dodd-Frank,” Greenberger said.