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Ron S. Geffner

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Battle of the Regulators

Posted: 05/26/09 06:25 PM ET

As early as next week, the Obama administration is expected to unveil plans to dismantle parts of the U.S. Securities and Exchange Commission in a regulatory reorganization. A proposal, still believed by many to be in draft form, is rumored to reallocate regulatory supervision of the financial titans -- those institutions deemed too large to fail -- to the Federal Reserve. Other items expected to be stripped from SEC oversight include consumer finance products such as mutual funds. A regulatory reorganization is premature and inconsistent with other actions taken on Capital Hill.

On February 26, 2009, the Obama administration announced plans to boost the SEC's budget by 13%. The SEC has been underfinanced for almost two decades and as a result, understaffed. It will take time to both hire and train new staff even after the new budget goes into effect in fiscal 2010. Nonetheless, the economic crisis was not a function of the gaffe involving Madoff. The economic crisis is a result, in part, of the real estate bubble, caused by exceptionally long periods of low interest rates, a decision driven by the Federal Reserve.

Another culprit, Fannie Mae and Freddie Mac -- thank you Congress. Sorry, but everyone does not deserve to own a home. If you cannot afford to pay for it, don't buy it. If you're a lender and they cannot afford to pay for it, don't extend credit. Our economy was drunk on the American consumer's excess and we are now experiencing the hangover. Point is, there is no regulatory agency nor are any of our elected officials without blood on their hands. Each has contributed to the economic crisis. The SEC has a long history of and experience in monitoring and prosecuting the financial industry. Over the next 12 months the SEC will continue to dramatically recreate and improve itself as the budget increases allow the SEC to hire and train new staff and the new Chairwoman, Mary Schapiro continues to implement her plan. We all want the economy to improve, but recognize that haste makes waste. Allow the budget to kick in and provide the Chairwoman the opportunity to do her job.