Take a look at this and tell me if they say anything about their funding being cut and that they are losing the ability to properly regulate financial markets.
http://www.sec.gov/about/whatwedo.shtml
The funding cut argument, even if true, does not change the heart of my argument, which is that this mess could have been avoided without any increase in regulation or funding to regulators had any of the participants taken a moment to think that there would not be some almightly government to bail them out. Madoff would surely still have gotten some money, but nothing close to what he has.