Wednesday, May 20, 2009

Government Considers Stripping SEC of Powers reports that "U.S. Considers Stripping SEC of Powers in Regulatory Overhaul".

"The Obama administration may call for stripping the Securities and Exchange Commission of some of its powers under a regulatory reorganization that could be unveiled as soon as next week, people familiar with the matter said.

"The proposal, still being drafted, is likely to give the Federal Reserve more authority to supervise financial firms deemed too big to fail."

So far, I don't like this at all. Whatever the shortcomings, whatever the past and present mistakes, SEC is UNDER THE US GOVERNMENT'S JURISDICTION. Whereas the Federal Reserve, it is an INDEPENDENT entity owned by its member banks. The US government does not have formal authority over it. Remember, we can't even audit its books!

Oh wait, at least I was not alone in thinking it would be a mistake:

"“It would be a terrible mistake,” said Stanley Sporkin, a former federal judge and enforcement chief at the SEC. “Whatever the SEC has done or didn’t do, it is still the premier investor protection agency around.” "

It was the then-Treasury Secretary Paulson who wanted to expand the Fed's role in regulating the financial industry in March 2008. Now we are moving very fast in that direction:

"Geithner was set to discuss the proposals at a dinner last night with Summers, former Fed Chairman Paul Volcker, ex-SEC Chairman Arthur Levitt and Elizabeth Warren, the Harvard University law professor who heads the congressional watchdog group for the $700 billion Troubled Asset Relief Program."

There are people who argue against it on conflict of interest:

"Opponents of giving the Fed more authority, such as former SEC chief Levitt, have said the central bank’s focus on keeping the financial system solvent may trump efforts to punish companies for violating securities laws."

As the article points out, it doesn't help SEC when two of their attorneys are being investigated for possible (looks like probable) insider trading.

Don't waste a good crisis, the White House Chief of Staff says. Indeed.


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