Courtesy of Pam Martens.
By James A. Kidney: June 18, 2015
James A. Kidney, Former SEC Trial Attorney
President Obama has two vacancies to fill on the five-member Securities and Exchange Commission. One will be a Democrat and the other must be a Republican or independent. Rather than use these appointments as an opportunity to bring on both real-world experience from finance and open the commissioner ranks beyond Washington and New York, early word is that the likely nominees are from the same old well: Wall Street lawyers and congressional staffers. These selections possibly have the virtue of relatively easy confirmation through a recalcitrant Senate, but they are a lost opportunity.
Daniel Gallagher, one of two Republican commissioners, is resigning after serving since November 7, 2011. Long-time Democratic Commissioner Luis Aguilar is leaving after serving since July 31, 2008. Their replacements will serve well into the next administration. They will face continuing issues in the long, drawn-out implementation and enforcement of remaining Dodd-Frank rules and could help to push a reluctant Commission to address important issues subject to their jurisdiction, including a proposal – dead for now – to require public companies to disclose their political contributions. The latter issue could well become a focus of renewed attention after the coming election. There also are continuing questions about the impact of stock buybacks, program trading and other recent market practices. Are they safe? Do they require any or more regulation? The SEC, which is largely reactive and late, has done little to nothing to study these issues.
The SEC also has work to do to restore its reputation as an effective agency which is not captive to those it is supposed to regulate. Along with the Department of Justice, there is reasonable skepticism that the agency was sufficiently tough on individuals who approved suspect practices on Wall Street that contributed to the 2008 financial crash. Appointing more lawyers with a history of defending financial wrongdoers and their employers will not relieve this concern.
At least three names, and perhaps others, have surfaced as potential nominees for the Gallagher and Aguilar vacancies. Two are Washington lawyers specializing in counseling or defending corporations. The third is on the congressional banking staff. Presumably they are well qualified (on paper, at least) and have good intentions. We will not name them here because my point is not to be critical of them, but to suggest that the President’s net should be wider.
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