Mary Schapiro Should Not Be Confirmed as SEC Chief
Barack Obama's selection of Mary L. Schapiro to head up the Securities and Exchange Commission is a bitter disappointment to investors. Her appointment will do nothing to reinvigorate an agency that has been a toothless tiger and a puppet of the industry it is supposed to regulate.
Here are some questions she should be asked at her confirmation hearing:
1. You have been a career bureaucrat. You have never held a job in the private sector. You have only held positions with industry dominated organizations. Isn't this the time to have someone running the SEC who has extraordinary judgment and an instinct for the jugular when it comes to protecting investors?
2. You have been Chairman of the Financial Industry Regulatory Authority (FINRA) and its predecessor, the NASD, since 2006. You were the President of NASD Regulation starting in 1996. These are industry dominated organizations who most often act to protect the industry from investors. Should we expect you to switch allegiances if you are confirmed?
3. Under your stewardship, FINRA missed the Madoff scandal, the Auction Rate Bond fraud, and the credit swap fiasco, which caused Wall Street to meltdown and threw the global economy into an unprecedented financial panic. Why should we assume you will be any more vigilant at the SEC?
4. Leadership in vigorously pursuing these frauds has been largely taken over by state regulators, like William Frances Galvin, the highly respected Secretary of the Commonwealth of Massachusetts , Joe Borg, the Commissioner of Securities in Alabama, and Andrew Cuomo, the Attorney General of New York. FINRA's role has been reluctant at best. Is this the kind of foot-dragging leadership you will bring to the SEC?
5. FINRA runs a mandatory arbitration system that requires investors to submit all disputes with their brokers to arbitration run by FINRA for the benefit of the industry. Secretary Galvin testified before Congress that this system represented "an industry sponsored damage-containment and control program masquerading as a juridical proceeding." Investors who have been victimized by their brokers are often re-victimized by this process. Is this the way you intend to protect investors at the SEC if you are confirmed?
6. FINRA has refused to provide copies of its database of awards to academics and others who want to review them and publish findings on the fairness of the process. A request by the authors of the Solin/O'Neal study for this information was denied by FINRA. In fact, FINRA hired a major law firm to fight this request. The SEC supervises the mandatory arbitration process. Will you continue to support hiding this data or do you believe in Justice Brandeis' observation that "sunshine is the best disinfectant"?
7. The Fairness in Arbitration Act of 2007 would ban mandatory arbitration clauses in consumer agreements, including agreements with stock brokers and advisors. FINRA is opposed to it under your leadership. Can we expect you to continue to advocate depriving investors of their constitutional right to access to a jury trial if you are confirmed, or will you support this legislation?
While the securities industry is salivating that Ms. Schapiro has somehow slipped through the cracks of otherwise stellar Obama appointments, investors are deeply concerned. Blocking her confirmation will not be easy, but we simply cannot afford to have more years of business as usual at the SEC.
Follow Dan Solin on Twitter: www.twitter.com/DanSolin
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Maybe she got picked because SHE HAS BEEN INVOLVED and knows where all the holes in the system are that need to be fixed... Obama and his team are very sharp and I'd be amazed to find that they are going soft with economy related SEC oversight selections
IF she knew where the holes were then WHY didn't she fix them? Or at least become a whistle-blower? Like Tony Soprano used to say: USE YOUR HEAD!
No one can "fix" things in a fixed system and I think we all know what has happened to whistle-blowers in the last eight years.
Point number 2 above is important.
Ms. Schapiro ran NASD regulation when it was -- as it still is -- a smoke screen to make investors think someone cares about them.
She is a petty bureaucrat, and she cares about nothing but the career of Mary Schapiro!!!
And I will gladly tell her this to her face.
To add to point #2: Madoff family and associates hold seats at the NASD, which was the policy board. The NYSE held the investigation and arbitration powers. Madoff lobbied heavily, giving hundreds of thousands of dollars to politicians, to get the powers merged into the FINRA, which was then CEO'ed by Schapiro.
Thanks for that, Dan Solin.
Despite all the pledges for "change", it looks like Obama is most certainly beholden to, or at least in awe of, the financial Big Boys, who over the course of the past 10 years have steadfastly done as much as they can to extort every drop of blood out of the US Economy.
Given the billions of dollars these swindlers and tycoons manage, it is not dumbfounding that Obama wants to avoid a major battle with the Market Big-Boys right out of the gate.
But if there is ONE issue that won Obama the White House, it is precisely this economic crisis, this maelstrom of financial value into a cesspool of wrecked investments and destroyed financial lives.
It would be a tragedy if Obama allows himself to be co-opted by the K St. lobbies and financial class- a fate that has already befallen Speaker Pelosi, who, if she is not careful, will go down as a villain of this financial crisis, she has done NOTHING to investigate or over-watch the BILLIONS of taxpayer dollars (actually, taxpayer DEBT OBLIGATIONS - "funny-money" Paulson's Treasury has printed up with no real backing) she handed to Bush & Paulson NO STRINGS ATTACHED, and in the coming months if this economy continues to deteriorate, SHE and the Corporate, DC Democrats are going to be the target of finger pointers. (And rightly so.)
With a weak SEC pick, Obama seem headed straight down that dismal path.
President-elect Obama appears to be trying to pick and choose. His Agriculture and SEC picks appear to be people always in bed with business, while his Labor pick is very nearly the best possible and so is his Interior pick. Yet his Treasury pick is in the same vein as Agriculture and SEC. I'm not quite sure what he's trying to do, whether he's trying to make people who have been part of the problem part of the solution or whether he is trying to throw bones to liberals with Labor and Interior and then marginalize those appointees.
Unfortunatly it appears that Barak Obama has planted one of his two feet in his own political grave and he hasnt even been sworn in yet. The people he has hired for his economic team are the very same people who caused these problems. The very same people the Bush administration was using. Like too many other poloticians he took campaign money from wall street and we are seeing the result.
The SEC is a joke & needs a real tough cop/leader.
Just saying Cox sucks & anything is better is not acceptable.
& If you think Madoff is the only guy preying on investors, you can't see, smell or hear. Criminals are winning.
I appreciate this article & like how the author understands the FINRA agency & holds Schapiro responsible for her work here.
We need a bullet-proof leader as the head of the SEC, let's make sure Schapiro is the best person for the job.
thanks for penning this. Obama doesn't seem to have main-street in his concerns w/ her nomination.
Thank you Mr. Solin for chiming in on the selection of Mary Schapiro as PEO's SEC Chief. But, if you don't mind, I think I'll defer to Mr. Obama's proven ability to frame his vision and articulate his short and long term goals for the nation. He and the members of his transition team are well aware of the challenges we face together as a nation, they have insight to information you and I will never have. They alone have a vision for how to lead us through these difficult times. They also know how the various pieces of the Obama-Biden administration puzzle must fit if we are to meet our problems head on I trust Mr. Obama's intellectual prowess, his political savvy and his administrative skills, so I'll just wait until he's in office and see how his plans pan out before I begin criticizing the outcome of his decisions.
It is really amazing how Democrats are so eager to eat their own. Already they are the most critical of Obama before he takes office and begins to implement his policies. I have no problem with being critical of Obama. I do, however, think that he deserves some cooling off period to implement his policies. If the people he has chosen turn out to be so abominable then we have a right to demand changes from Obama. At this time I am not comfortable with Obama's critics who seem to be absolutely sure about negative impact of some of his cabinet/staff nominees.
Obama is not the all powerful OZ - If you want to implement good policies, you need good people. Mediocre underlings give you mediocre results. That's Management & Leadership 101.
Anyone wh othinks a mediocre bureaucrat and supporter of the financial industry might have been chosen to be a vigorous proponent of progressive change or improved investor protection in that industry is in a serious fantasy bubble. Leopards do not change their spots. If the Dems (remember, Obama does not make these picks in a vacuum) really wanted to change the industry, they would have chosen someone else.
Want to wait to see what happens? Cool. See you here in a year and a half. I predict change to be zero if she is still in the position.
It's time for everybody to accept that Obama is a conservative Democrat along the lines of the Democratic Leadership Council. Don't be surprised when we're disappointed with his four years in office.
Very enlightening and interesting perspective, Dan. I would love to hear Ms. Schapiro respond to your article.
Your praise of Galvin, Borg, and Cuomo seems appropriate to me but if the Obama administration really wants change on Wall St. and would like to ensure protection of investors and a change in the dishonest paradigm that pervades the street, there are only two words that one needs to know:
Elliot Spitzer.
I'm sort of confused with your thinking here on a few points. Point 1 seems to criticize Schapiro for lacking private sector experience, yet point 4 praises several state regulatory officials who (correct me if I'm wrong) also lack significant private sector experience. Would you accept Cuomo or Galvin in the SEC chief position despite their lack of industry experience?
Agree that putting "industry experience" up front is a mistake, but so is relying on some one who has never been on the planet. Where do you find someone who has been on the planet but not corrupted by it? Bill Donaldson (remember him?) might have made an historic difference. Speaking of forks in the road of history . . . . Timing is everything. Spitz would have been very interesting. Even the confirmation hearings.
After Chris Cox the only way to go is up.
She would be a great symbolic appointment if the SEC were soon to be abolished, but I fear that's not the plan. Would like to know who moved this, or maybe I already do: C. Schumer, D-NY, & Co..
Wall Street still calling the shots? How about a pail of ice water in the face for Obama Believers?
I am appalled at Obama's choices. Thank you for elucidating why this one stinks. And BTW, all your columns are excellent. Not one dud so far. ;-)
Obama's economic view is clearly shaped by Citigroup's Robert Rubin and his proteges Larry Summers and Tim Geithner. Rubin is a creature of Wall Street, an architect of Citigroup's remarkable risk meltdown, and a firm believer that financial markets need to be free to make billionaires like himself.
Mary Schapiro is the perfect Obama-Rubin candidate for SEC. She will make sure that Wall Street continues to skim billions off the top of the US economy, and this money will be partly recycled into political donations, so the merry-go-round continues.
Very good questions. I am disappointed with this nomination at such a critical time.
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