Wall Street Should Bailout the S.E.C.
If the Securities and Exchange Commission really is going broke, then Wall Street needs to step up and bail it out.
Yes. I said it.
Stop and read that statement over again. Let it marinate in your mind for a moment. Feel more than free to consider the source. Let's get into it a bit. Those of you who read my blog regularly know just how strongly I stand against any and all government entities, particularly with regards to markets.
Yet today, I am going to play the Devil's Advocate with my own demons and consider a possibility that I am often scared to think of...let alone speak of.
3 Reasons Why Wall Street Needs the S.E.C
1) The S.E.C. is a Self-Funding Entity
Tax dollars do not fund the S.E.C. The entire budget comes from Wall Street firms. Under the law, the agency must
collect transaction fees and assessments that are designed to recover the costs to the government of the supervision and regulation of securities markets and securities professionals. It does not, however, use the proceeds of the penalties and fines from civil cases to pay for itself, which many believe could pervert the legal process.
Consider the last sentence. Consider how easily that law could be amended in the current environment and what huge support it would have in the public eye. Consider what Wall Street lives would look like if the S.E.C. went on their very own road show? Consider how the S.E.C. could go about building its budget via pecuniary tactics. Consider how expensive business would become for Wall Street. Just consider it.
2) Big Government Opportunism
S.E.C. head Mary Schapiro claims the regulator has been denied a $160 million budget increase which it planned to use for the hire of 800 new investigators. The agency's overall budget stands at $1.1 billion, that's just one 1/4 of the levy British banks will pay this year.
What does this mean? It means that with another major screw up and the regulator may easily find itself on the outs in Washington. After all, the politicians need someone to blame. Who better than the weakest link amongst them. With the S.E.C. out of the way or reduced to a miniscule role, hawkish regulators would be left open to a very liberal interpretation of regulatory measures.
Do you really want to go there? You tell me...
The rumors of many a new financial agency have been swirling for quite a while. Many of you believe that banking levies and more stringent regulation are an impossibility in the U.S. I am here to tell you otherwise. There are many ways to skin a tiger of his stripes. There are many ways for the richest men to end up like Wesley Snipes.
3) Public Opinion
I piss on populism but there are times when it cannot be ignored. A shortage of S.E.C. investigators would open the flood gates for any boiler room, chop shopper to go fraud happy. An industry which has taken so many black eyes recently needs to regulate itself, making sure the good eggs shine and that the rotten apples stay out of the limelight.
A hamstrung Securities and Exchange Commission only points to a greater likelihood of another Madoff situation in the very near future. Such an event would bury Wall Street. Much more importantly, the S.E.C. is the brand name in the public's mind as far as finance regulation is concerned.
Now more than ever, Wall Street needs Main Street's faith. The further rupture of the S.E.C. would only enhance the populist theorem that the banksters have won.
This is one of those watershed moments when a single drop in the bucket can cause a flood of Biblical proportions. Right now, the S.E.C. is the Hoover Dam for Wall Street, whether you would like to believe it or not.
I like to beat my Bible like most with a pulpit, but at the end of the day, incentive compatibility rules.
Sometimes you have to make a Deal with the Devil if it is in your own interest.
But there are no lambs in this game...so know the rules well if you play.
Totally! I would love to see Wall Street ridiculing the SEC in front of Congress, and forcing SEC employees to take pay cuts.
You make a compelling point. The last thing we need is direct oversight by the idiots in office.
How to go about 'bailing out' the SEC without looking like we're 'buying it out'? Perception is the key issue
Slightly increase the transaction fees? Maybe temporarily?
Double post - deleted.
Can't the rotten apples be dealt with by the feds and the legal system? It's not like the SEC was instrumental in taking down Madoff- they were tipped off and did nothing about it. Another bureaucratic entity that exists to make people happy.
In other news, criminals need to bail out the Justice Department, Somali pirates need to bail out the Coast Guard, medical boards need to bail out the FDA, and coal companies need to bail out the EPA.
This thread is bad and you should feel bad OP.
So.....the SEC is a buffer. Is it perfect? no. But would you really prefer direct congressional oversight? Remember, they hate us right now......
Actually, I personally sent a note to Liz Warren yesterday on this very subject (not that I expect her to read it, or for it to go anywhere). For those who don't know, the Consumer Financial Protection Bureau is calling for suggestions on areas to address when they get rolling full steam.
I suggested the abolition of the SEC, as it is clearly dysfunctional and unable to live up to its charter, and advocated its replacement with independent fraud investigators (myself among them) working only for a percentage of the fraud they expose. This works for several reasons. First, it is well known that the SEC is far too cozy with the industry, and knowingly looks the other way at the most egregious transgressions - as long as they're committed by the big guys.
If you are a small firm and you fuck up just a little bit, you can expect the full measure of the SEC's enforcement arm. If you're Bernie Madoff or Goldman Sachs, you can go merrily about your business raping the economic corpse of America with nary an SEC agent in sight.
Second, it completely eliminates the SEC's budget, which is a joke to begin with. You guys probably don't know this, but the SEC doesn't even have a budget for financial periodicals. In other words, they can't afford to buy a copy of Barron's to see what might be going on in the industry they're tasked with policing. If an individual agent wants to read the Wall Street Journal, he's gotta buy a copy like everyone else. The SEC is just fucked eight ways from Sunday.
Should the industry pony up more dough to keep the SEC solvent? Nope. That's what's causing the problem in the first place. I think if 2008 has taught us anything, it's that self-regulatory agencies don't work.
Start paying lawyers, investigative journalists, and ex-Wall Street insiders a bounty for the ugly shit they uncover and you'll see some traction on getting these problems under control.
Braverman, you paid snitch... I will crush you for questioning the Alliance.
Did you use this term in your letter to Liz Warren?
A very eloquent argument, Midas. It's interesting how we don't seem to think about the question: if not the SEC, then who else will it be? Why don't we just get the existing body to do its job properly before replacing it with yet another bloated government apparatus?
Eddie, Wasn't there some whistle blower initiative awhile back that would give 30% or something to those that brought forward evidence of financial misdeeds? I feel like thats much too large of a percentage but don't necessarily hate the idea.
There is, but in typical SEC fashion, it only applies to insider trading and a couple other esoteric aspects of regulation. For example, Markopolis exposed Madoff (more than once), and even if the SEC had taken Madoff down as a result, Markopolis wouldn't have made a penny.
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