By Daniel Indiviglio and Agnes T. Crane
WASHINGTON, Nov 26 (Reuters Breakingviews) - With apologies
to Jay Z, U.S. President Barack Obama's got 99 problems, but the
Securities and Exchange Commission isn't one. That's the message
sent by his pick of Elisse Walter as the watchdog's new boss.
For those who'd like to see a tougher beat cop on Wall Street,
it's not a particularly inspiring choice. But installing a
bureaucrat reflects Obama's need to conserve political capital
for bigger fights on fiscal issues and his cabinet rather than
attempting an upgrade of the SEC's import.
Departing Chair Mary Schapiro took the helm of an agency in
disarray in 2009. The SEC missed red flags leading up to the
financial crisis, the collapse of two of the biggest firms
within its purview - Lehman Brothers and Bear Stearns - and the
massive Ponzi scheme perpetrated by Bernie Madoff. Schapiro
pursued more enforcement actions than her predecessors,
including a record $550 million settlement with Goldman Sachs
. But she never pushed through what would have been her
signature achievement: reform of money market funds.
That left Treasury Secretary Timothy Geithner to pick up the
pieces. Ceding such ground to others agencies casts doubt on the
commission's potency - and future heft. Walter doesn't appear
any better positioned than her predecessor in this sense: Though
she was Schapiro's ally on the money market issue, she also
failed to persuade her colleagues to move the rule forward.
Walter's bureaucratic background embodies a light version of
Schapiro's, even having worked as a senior executive at the
Financial Industry Regulatory Authority, where Schapiro was CEO.
As a career watchdog, she lacks the Wall Street experience that
has helped poachers-turned-gamekeepers like, more recently,
William Donaldson, or the godfather of the commission, Joseph P.
Kennedy. She also doesn't sport an attack-dog resume to make
Wall Street shudder. A more aggressive choice in that regard
would be U.S. Attorney for the Southern District of New York
Preet Bharara.
One benefit of a soft SEC is that it could set the stage for
a merger with the Commodity Futures Trading Commission. The
shady financial dealings of the past half decade, however,
suggest a tough cop is necessary for financial stability. With
the looming fiscal cliff, high unemployment and a new cabinet to
install, it's easy to see why the president would want to avoid
a confirmation fight over an agency that's doing so-so work.
It's a shame - but one he might be able to rectify once his
bigger fish have been fried.
The authors are Reuters Breakingviews columnists. The opinions
expressed are their own.)
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