Who Should Obama Appoint to Head the SEC?

The Bernard Madoff scandal is the last straw for the existing leadership of the U.S. Securities & Exchange Commission.

That the SEC was warned repeatedly about Madoff, and even conducted several inquiries into his firm, but did not uncover the massive fraud proves that the important agency needs a major overhaul.

SEC chairman Christopher Cox has proved to be an ineffective leader, to say the least. Most famously, Cox assured investors nine months ago that Bear Stearns was fine. It collapsed three days later.

It gets worse. According to a story by Stephen Labaton in today’s New York Times, the SEC has been plagued by some pretty shady behavior, including botched investigations and “accusations that several SEC employees have engaged in illegal insider trading and falsified financial disclosure forms.”

This is unbelievably appalling! The agency tasked with enforcing securities laws is allegedly breaking those very laws! Check out this link to the reports of the SEC’s inspector general.

Many people don’t realize this but the SEC was created as a result of the 1929 stock market crash and related financial shenanigans. The main reason for the creation of the SEC in 1934 was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. Sounds relevant today, no?

In fact, a strong regulator overseeing financial markets is more important than ever in today’s complex, fluid and interconnected global economy.

So who would be an ideal leader to overhaul the agency and take it into the future?

I am not sure. But I think we need someone with same gravitas and experience like past SEC chairman Arthur Levitt, who ran the SEC from 1993 to 2001 and was widely credited with upgrading the agency and serving as a strong advocate and protector of investors.

Although chairman Cox is a smart guy with law and business degrees from Harvard, I think experience has shown that he did not have a full understanding of today’s financial markets. So whoever gets the job needs to have a lot more experience working on or with Wall Street.

I am throwing out a few ideas here just to get the conversation started:

John Thain, former CEO of Merrill Lynch
Warren Buffett, investing legend
Joel Seligman, leading scholar of SEC and president of University of Rochester
Lynn Turner, former chief accountant of the SEC
Laura Unger, former SEC Commissioner and Acting Chairperson of the SEC

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3 Responses to “Who Should Obama Appoint to Head the SEC?”

  1. Chris Hartman Says:

    If Obama is considering a Republican somewhere in the mix – and I don’t think he’s averse to that – he might consider Jim Leach, the former Republican congressman from Iowa who is now a Lecturer at the Kennedy School of Government. He’s a graduate of Johns Hopkins and the London School of Economics, and was formerly Chairman of the House Banking and Financial Services Committee.

    Pros: A reasonable, centrist Republican who’s eminently qualified to serve in this capacity. It would give Obama the opportunity to add a tangible “bi-partisan” component to his economic approach. Leach also supported Obama in the recent presidential campaign, and was a high-profile speaker at the DNC in August.

    Con: Was a co-sponsor of the “Gramm-Leach-Bliley Act” of 1999 which eviscerated key regulatory provisions of the post-Depression era Glass- Steagall banking legislation.

    Overall, I think Leach, as a highly-respected and scrupulously ethical former legislator, and someone who has intimate knowledge of the commercial and investment banking systems, would thus be ideally suited to this critical role in Obama’s first term. He is also well-connected on Capitol Hill, and I think this would help him in getting reforms introduced and enacted — quickly.

  2. Spencer Ante Says:

    Hey Chris,
    I agree that the SEC post gives Obama another chance to reach across the aisle. However, I don’t know much about Jim Leach.

    The fact that he was the former Chairman of the House Banking and Financial Services Committee is a good resume builder for this job.

    The Con you raise about signing off the deregulatory bill may be a deal-killer, though.

  3. Too Little, Too Late Department: SEC Offers Mea Culpa on Madoff Flop « Creative Capital Says:

    [...] Too Late Department: SEC Offers Mea Culpa on Madoff Flop By Spencer Ante Yesterday morning, I posted a story saying that the Bernard Madoff scandal represented a new low point for the U.S. Sec…, underscoring the need for fresh leadership at this small yet critical federal [...]

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