Obama’s SEC pick, and her big job

Barack Obama has tapped Mary Schapiro, “a veteran and diligent regulator,” to head his Securities and Exchange Commission, said Floyd Norris in The New York Times. That’s good news for those who want the SEC to “recover from what must be the worst year in its history.” Outgoing chairman Christopher Cox just “condemned” his agency’s failure to uncover Bernard Madoff’s massive fraud, but its lax regulation was “a subject of scorn” before Madoff.

Cox is “awful,” said Gary Weiss in Seeking Alpha, but with all Obama’s talk of “change,” his selection of a “career bureaucrat” like Schapiro leaves me “utterly flummoxed—and disgusted.” She may be experienced, but the chances of her “instituting real, meaningful, desperately desired change” in the securities industry is close to nil.

“A more workable approach to securities law” is much needed, said the Los Angeles Times in an editorial, but new powers for the SEC aren’t. The agency’s failure to catch Madoff, even after receiving “multiple allegations of fraud,” is due to its not enforcing laws already on the books.

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Sure, “blame too little enforcement,” said The Wall Street Journal in an editorial. The SEC’s budget has more than doubled since the collapse of Enron, and its enforcement staff is at “modern record” highs. But it still failed to nail Madoff, because the SEC isn’t good at catching “determined and crafty” fraudsters. The only ones to figure out Madoff’s con were the “private research shops” the SEC wants more control over.

“Regulators are never going to catch every financial shenanigan before it blows up,” said Justin Fox in Time. But Schapiro could make things better by splitting the SEC and its fellow regulators into two agencies, one focused on consumers and investors and one on the health of financial institutions. Maybe Schapiro shouldn’t try to fix the SEC, but instead “shut it down and replace it with something better.”