September 21, 2008
What is the SEC, a Potted Plant?
Posted by David Zaring

SEC chair Chris Cox showed up at the Bush news conference last week, along with Ben Bernanke and Henry Paulson.  John McCain called for his resignation, too.  But other than issuing a much-criticized temporary ban/disclosure req't on shorting financial stocks (and a less criticized ban on naked shorts), what, exactly, have Cox and the SEC being doing to regulate markets and oversee the capital adequacy of the investment banks under their aegis?

Let's have a look at the SEC's own record last week:

I read this as a record of "me too!" in response to Treasury and Fed action, at least when it doesn't come to flogging shorts. 

The problem with the SEC is that, even though it is self-funded like the Fed, it isn't anything like a central bank for investment banks or brokers.  What we've been seeing in the past week is the SEC performing the enforcement-related functions it always performs, and enforcement functions aren't what is wanted.  The question has not been "Who killed Wall Street?"  It has been "Can we save Wall Street?  And should we?"

The SEC has had nothing to say about those second two questions, perhaps because of the way the agency is structured, perhaps because it tends to regulate by prosecution, rather than supervision. 

Perhaps, anyway.  But any pretence that the agency could make at performing banking-style supervision of the capitalization of investment banks just met its Waterloo.  The last two remaining independent investment banks have just left SEC supervision and become bank holding companies, regulated by the Fed, an agency with the funds to bail them out. Surprising stuff.  But these banks know who can help in a pinch, and who can go find someone else to investigate.  (HT: Steven Davidoff)

Maybe the SEC will find a new role to play in SOX II.

| Bookmark

TrackBacks (1)

TrackBack URL for this entry:

Links to weblogs that reference What is the SEC, a Potted Plant?:

» From Wall Street to Connecticut from Ideoblog ...
"So the Fed has taken over Wall Street. Here’s the WSJ, and David Zaring (who has emerged as a point ..." [more] (Tracked on September 22, 2008 @ 5:03)
Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links