SEC Head: Obama Watchdog Plan "Damaging"

Chair Mary Schapiro Says Plan To Protect Consumers Would Undermine Her Agency

(AP)  The head of the Securities and Exchange Commission is objecting to a plan being considered by the Obama administration to create a new financial watchdog to protect consumers.

SEC Chairman Mary Schapiro said such a new entity, which was discussed Tuesday night by Treasury Secretary Timothy Geithner and other officials, would reduce the SEC's authority and damage government protection of investors.

"I question pretty profoundly any model that would try to move investor protection functions out of the Securities and Exchange Commission," Schapiro said Wednesday.

That couldn't be done "without really damaging the fabric of the entire investor protection regime," she told reporters.

The proposal the administration was considering would centralize the enforcement of laws that protect consumers of financial products, such as credit cards, mortgages and mutual funds. That effort currently is spread across a number of federal and state agencies, including the SEC, with oversight of mutual funds and other investments, the Federal Reserve and Federal Trade Commission.

Any changes to the nation's financial rule book and oversight will require congressional action and it's unclear whether lawmakers will unite behind a single approach this year.

Schapiro's comments marked her first sharp public breach with the administration over the shape of the overhaul of rules designed to prevent another massive financial breakdown. Schapiro has in recent weeks affirmed in testimony to Congress, which is debating the changes, her position that the SEC must play a key role as an independent watchdog protecting investors in any new financial regulation system.

Schapiro also has said she favors the idea floated recently by Sheila Bair, the head of the Federal Deposit Insurance Corp., for a new "systemic risk council" to monitor large institutions against financial threats that would include the Treasury Department, Fed, FDIC and SEC. The White House, by contrast, leans toward recommending that the Fed alone become the new supercop for "too big to fail" financial companies capable of setting off another meltdown.

Officials said the administration has been exploring the new approach in meetings over the past few days with executives of the financial industry. It was discussed at a dinner Tuesday at the Treasury Department attended by Geithner and Lawrence Summers, director of President Barack Obama's National Economic Council.

Schapiro said Wednesday she has been engaged with administration officials in offering her views on the issue, and didn't view the proposal as in its final form.

"I certainly hope we'll be refining it," she said. "I don't think it's a concrete proposal by any means at this point."

An administration official who confirmed that the dinner had taken place said no final decisions had been reached.

Under one possible approach, some federal banking agencies might be combined and some powers over consumer products might be consolidated into a new body.

An industry official said the administration supported the concept that already has been introduced in legislation by several senators. This official said the administration may offer its own approach to the issue.

Geithner has said extensive changes were needed to make sure that the current financial crisis, the worst in seven decades, is never repeated. In prepared remarks to the Senate Banking Committee Wednesday, Geithner said new financial products have resulted in benefits, but lax regulation has exposed Americans to abuses. He said government rules should ensure that financial choices are clear, reasonable and appropriate.

The officials who spoke late Tuesday did so on condition that their names not be used because the administration was not ready to unveil a proposal.

Treasury issued a statement late Tuesday that called the dinner "one of a series of meetings with a wide range of relevant constituencies and experts" to seek views on regulatory reform. "No decisions have been made but the administration is actively seeking various viewpoints as it puts together its framework."

A leading proponent of the commission approach has been Harvard University professor Elizabeth Warren, who is the head of the Congressional Oversight Panel for the government's $700 billion financial rescue effort.

Warren argued in a 2007 article that the government needed to do a better job of protecting homeowners who take out mortgages and consumers of other increasingly complex financial products.

Sens. Richard Durbin, D-Ill., Charles Schumer, D-N.Y., and Edward Kennedy, D-Mass., introduced legislation earlier this year that would create a commission like the one proposed by Warren.

Some industry groups already have expressed opposition to the plan.

The Financial Services Roundtable, which represents some of the biggest institutions in the country, has argued that it would be a mistake to separate the regulation of financial products from the regulators who oversee the institutions selling those products.

It was unclear whether the administration will propose creating a new federal agency to house the commission or placing the commission under an existing agency.

The administration is expected to unveil its proposal in the next few weeks as it pushes ahead with a sweeping effort to overhaul the government's financial regulatory system.

The administration already has put forward some broad principles for financial regulatory overhaul, including creation of new powers to allow authorities to take over major financial institutions that represent a threat to the system.

[omnibus66]

That couldn't be done "without really damaging the fabric of the entire investor protection regime," she told reporters.

Translation - The stock market is, and has been the biggest, most profitable casino in the world and we want to keep it that way.

[voxpopulus]

"Right around this time there's a heck a lot (millions, perhaps) of Obama voters who are feeling pretty stupid for supporting him" Yeah sure, because you Republican posters were SO honest during the primaries (pretending to be Democrat women) and since. Obama's popularity eclipses that of anyone in the party of no, and will for a long time to come.

[voxpopulus]

Well dear, the SEC hasn't exactly been doing a sterling job so far

[beach671]

Who was it that decided to let illegal immigrants in 2005 start getting mortgages in the United States?

After the 5 million went into foreclosure......how do you go after those non-citizens with no Social Security numbers for the Trillions they got away with swapping homes for sale between themselves then ditching the country with the loot and letting the homes go into foreclosure?

Can't go after them can you. Such widespread fraud from the Fed's down to the illegals stealing money and now the real citizens of the United States are paying for it as our economy collapses.

[spaceatoms]

Its more control in an area that is suppose to be left alone, Wall Street messed up and right now AIG is out of business in the virtual world and the country is going into a summer meltdown, but no the foreign investors were sarcastically spared while we lose our jobs here due to the globalization policies so Joe the Kennedy plumber can ride a boat in Maine. I really want to feel like the person in Pakistan who is dead broke living like dirt, this country is psychotic and we might as well listen to Arnold and legalize marijuana instead of hiding it, everything is a secret in this country.

[earlysaid]

Dear Mary is not the one who has the job of President of this country. Hopefully she will lose her job in the SEC. President Obama needs to keep replacing Bush appointees with people who care about the middle class as well as the wealthy. We need oversight badly to stop the criminal actions of financial institutions.

[jumkey]

Posted by weedapoopl

Listening to your BS you'd almost think the Democrats have been running this country for the last 25 years.

Did you vote for Dumya and his Republican partners in crime?

Yeah, I thought so.

[weedapoopl]

And Jimmy Carter was a pretty bad president, too.

Moving right along...

[texasbeta]

...done with overwhelming bipartisan support, and signed eagerly by Bill Clinton, the king of sleaze.
Posted by weedapoopl

No kidding. How funny...all the Democrats, like me...LOVE Bill Clinton. The Repubs are still trying to blame him for everything from crucifying Jesus to eliminating life on Jupiter. BUT. the more you get into it...the Republicans should LOVE HIM. Nafta, WTO, deregulation...talk about playing both sides. They are up in arms about getting a bj in the oval office I guess. How ridiculous...I would get a bj in the oval office if I got there. I would have a crazy porno party that lasted for a year if I got there. I guess that is one of the many reason why I will never be there.

[weedapoopl]

Posted by texasbeta at 5:03 PM : May 20, 2009

Thanks, but I was talking more about the courts splitting up AT&T, and trying to split up IBM.

Believe it or not, this country actually did go through another episode of companies getting "too big" and wreaking havoc.

Why didn't they split up GM or Chrysler?

Yes, the repeal of Glas-Steagal allowed financial companies to get too big. And it was all done against he strenuous objections of experts, done with overwhelming bipartisan support, and signed eagerly by Bill Clinton, the king of sleaze.

[texasbeta]

Remember when the courts used to split up big companies to keep them from getting "too big?"

Now you know why.

Why did they stop doing that?
Posted by weedapoopl

In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
This legislation repeal was the beginning of the catalyst that caused the entire meltdown.
1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
2. Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.
3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for massive speculation.
4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal "risk-assessment models."
7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms

[weedapoopl]

Should there be a special tax placed upon occupations in fields deemed "too big to fail" to protect the taxpayer's interest in the event of future failure.
Posted by cjs_cnet_xyz at 4:17 PM : May 20, 2009

Remember when the courts used to split up big companies to keep them from getting "too big?"

Now you know why.

Why did they stop doing that?

[cjs_cnet_xyz]

I guess there's no one other than Madoff that is here to answer for the criminality of all the financial loss of the middle class in this country. There is no Boesky here. All of this just "happened" and no one has to answer to it. Some people got wealthy. The middle class was made poorer. The taxpayer was made poorer. Yet, we are to believe that there is no one responsible for the theft. Interesting. If we cannot find anyone or any group responsible for this, why would we not put a new permanent taxation upon all those that have gained in this industry at the expense of the taxpayer? Should there be a special tax placed upon occupations in fields deemed "too big to fail" to protect the taxpayer's interest in the event of future failure.

[DefendLiberty]

Shapiro:

"To hell with the consumer. I must protect the INVESTOR CLASS, and MY JOB". This provincial shill needs to be given a (Wall Street) mafia sendoff.

[sjc_1]

You have Milken, Boesky, Keating, Messe and others with Reagan. You have Bebe Reboso, John Mitchell and a rogues gallery under Nixon. There have been lots of cases of greed run wild and no one to enforce the laws except the people put there to enforce them. However, those same people that are suppose to enforce the laws are too busy breaking the laws to enforce any of them. "If the President does something, that means it is NOT illegal".

[weedapoopl]

How is the SEC responsible for the risks they took with their money? Why is it the SEC's fault, when it was stupid people that put their money at risk in the first place?
Posted by Rowdy2009 at 2:53 PM : May 20, 2009

At the very least, they could have stopped Madoff when he was reported to the SEC in 2000 for the biggest financial fraud in history.

If the SEC can't stop the biggest financial fraud in history, even when it's dropped in their laps complete with mathematical proof, then they just aren't doing their job.

[weedapoopl]

I just want to make sure Clinton is not overlooked in any rush to judgement.
Posted by weedapoopl at 1:01 PM : May 20, 2009

I think everyone really agrees with your case on Clinton. I understand you.
Posted by stuart2561 at 1:03 PM : May 20, 2009

And that's exactly why nothing will change until the streets turn to rivers of blood.

Clinton is still cosidered the God and king of most Democrats. They won't allow ANY heresy of suggesting that somehow Clinton was in any way to blame for the meltdown of our regulatory systems that occurred on his watch.

Remember, it wasn't just Madoff. It wasn't just Enron, Worldcomm, Andersen Accounting and the rest.

It was also the utter failure to detect the 9/11 planning, as conspicuous as it was.

It was the banking deregulation that passed with overwhelming bipartisan support.

It was the systematic gutting of all regulatory systems that had been painstakingly constructed and refined over previous decades.

And all this happened long before George W. Bush even won the election.

Combine this with Clinton's incessant lying about WMD in Iraq, and a very ugly picture emerges of the Clinton administration.

The Clinton worshippers won't allow that to see the light of day. They want to keep all of that swept under the carpet and weighted down by their relentless Bush bashing.

There can be no solution, and there will be no solution, until the streets run red with rivers of blood.

Nothing will ever change until our nation descends into such chaos that finally the public snaps out of its drug induced stupor and starts demanding a return to law and order.

Then that will go too far, and we'll be back to the days of McCarthy....

Humans just refuse to use their brains to reach an intelligent solution. It always has to descend into the abyss of violence and death before anybody will change anything.

[kansas1946]

SEC Chairman Mary Schapiro said such a new entity, which was discussed Tuesday night by Treasury Secretary Timothy Geithner and other officials, would reduce the SEC's authority and damage government protection of investors.
*******************

Yeah, the SEC has done such a great job protecting consumers lately.

[mcintoshlou]

she is just one more anti progress, anti science, anti American republi'con'

[bobnjersey]

[That couldn't be done "without really damaging the fabric of the entire investor protection regime," she told reporters. ]

is this the same fabric that protected the madoff investors?