THE PLANK DECEMBER 18, 2008
What to make of Obama’s pick for SEC chair, Mary Shapiro? She wasn't exactly a dark horse, but the good money was on former SEC Commissioner Harvey Goldschmid and former Treasury Undersecretary Gary Gensler. But Shapiro has some particular qualifications.
First, her selection is good evidence that the administration is serious about combining
the SEC and the Commodity Futures Trading Commission. Shapiro has served on both--including
as CFTC chair--and thus brings both broad experience and a lack of territorial
loyalty to one or the other. She also has experience merging regulatory bodies,
having helped combine the National Association of Stock Dealers and the New
York Stock Exchange’s regulatory functions into the Financial Industry
Regulatory Authority (FINRA), which she now heads. With Shapiro in place, I’d
be surprised if major reform of at least the SEC and CFTC didn’t happen in
Obama’s first year.
There are a few beefs against her. First, under Shapiro FINRA
has seen a drop off in new cases. That could be the result of a decline in
wrong-doing, or a decline in FINRA’s enforcement zeal. Either way, it’s a
question that should be answered before she’s approved. Second, some people are
grumbling about FINRA’s role--or, seemingly, the lack thereof--in
regulating Madoff Investment Securities. Expect to see this line of argument
gain traction in Congress; Rep. Spencer Bauchus has already issued
a letter calling for an investigation. But there’s more smoke than fire here. True, Madoff had a broker-dealer arm,
and FINRA regulates broker-dealers. But the fraud all happened on the
now-infamous 17th floor, an operation completely separate from the
FINRA-regulated operations upstairs.
Perhaps the oddest point against her, raised by the usually
Weiss, is that she appeared on the cover of Equities, a stock-industry trade magazine. Right ... That said, Gary’s not
alone in voicing a larger concern, namely that she is too much of a bureaucrat
and too close to the finance industry to get much done, at a time when much
needs gettin’ done. Which is all well-taken, but also not definitive. Bill
Donaldson was probably the most established Wall Street figure available when
Bush picked him, but he went on to shake up the SEC in a way no one expected.