Securities and Exchange Commission

From today’s NY Times:

Mary Jo White, the new chairwoman of the Securities and Exchange Commission, has gotten off on the wrong foot. Last week, in her first commission vote, Ms. White led the commissioners in approving a proposal that, if finalized, could leave investors and taxpayers exposed to the ravages of reckless bank trading.

No kidding.  Wow.  Nobody saw that coming from – like – a mile away.  (I’ll be interested to see if Senator Warren offers an opinion here.   This seems like the sort of thing which would bother her.)  Back to the NY Times editorial:

At issue is the regulation of the multitrillion-dollar market in derivatives. When speculative derivative bets go right, the results are lavish bank profits and huge banker paydays. When they go wrong, the results are shareholder losses and taxpayer-provided bailouts…

The S.E.C. proposal would let the foreign branches of American banks avoid rules being developed under the Dodd-Frank financial reform law and instead follow rules that prevail in the foreign countries where the deals are done. Foreign banks involved in derivative deals with American companies also could adhere to their own country’s rules as long as those rules are deemed broadly comparable to Dodd-Frank rules…

… the S.E.C. proposal is weaker than the sound guidelines from the Commodity Futures Trading Commission, which oversees a larger swath of the derivatives market than the S.E.C. does. Disagreement among regulators now gives the banks and their Congressional allies in both parties renewed opportunity to shape final rules to their liking.

Meanwhile, the S.E.C. is about to consider a major rule governing hedge funds and other private companies that solicit investments from the public. Ms. White’s immediate predecessors supported an early proposal of the rule that, shockingly, did not include any specific investor protections.

Oh, I’m sure it’ll all turn out just fine.  (And no doubt Penny Pritzker will make a wonderful Commerce Secretary.)

What is needed is a new proposal with the safeguards recommended by the S.E.C.’s own Investor Advisory Committee, including steps that nonpublic companies must take to verify the ability of investors to understand and absorb the risks in private offerings, and requirements that those companies disclose the data the S.E.C. will need to adequately police them. This is a critical test for Ms. White, who has yet to show that she supports stronger regulations.

That Mr. Fish cartoon keeps coming to mind:

mydreamharpers