SEC being ‘Set up to Fail’

Republicans in the House and the Senate have introduced legislation requiring the Securities and Exchange Commission and other financial watchdogs to conduct a formal cost-benefit analysis, including a report by economists, before issuing any new rule. The Investor Advocate (the-investor-advocate.com) has spotlighted a little noticed hearing on Sept. 15 before the House Financial Services Committee, at which concerns were raised that the legislation would bog down the SEC in red tape, risking a repeat of the catastrophic weakening of investor protection that led to the financial crisis. In the hearing, Rep Jim Himes (D-Ct.) pointed out: “I’m not sure you can analyze the cost associated with the incredible destruction of American wealth . . . when you get what statisticians call a ‘tail event.’” Rep. Himes’ District includes Westport and Stamford. Rep. Ed Perlmutter (D-Co.), whose constituents live in the Denver suburbs, warned: ”Between July of 2008 and January of 2009 the market dropped 6,000 points. . . . For every man, woman and child in America, that was $26,000 . . . So now let’s try to do the cost-benefit analysis of that catastrophe.” SEC Chair Schapiro pointed out that: “My fear about the legislation is that it layers so many analyses on top of what we already do, that we’re – we’re set up to fail.” Late last week, Sen. Richard Shelby introduced similar legislation intended to also hobble the Federal Reserve, the CFTC and the FDIC. The bill is backed by the U.S. Chamber of Commerce.