President-elect Obama's appointment of Mary Schapiro to chair the Securities and Exchange Commission does not augur well for Obama's commitment to get at the roots of the financial crisis. Schapiro, who heads one of our broken financial system's main institutions of self-regulation, the Financial Industry Regulatory Authority, is known as a technically competent and politically moderate regulator who does not make waves. She served on the SEC beginning in 1988, having first been appointed by President Reagan.
The agency she heads is not a public agency at all. It is an industry trade association with quasi-regulatory functions delegated by the SEC. Under our ineffective system, a lot of regulatory authority is delegated to private institutions, such as the New York Stock Exchange, which is supposed to police the conduct of its members. We can see how well that worked out. When the exchange turned itself from a nonprofit into a for-profit company in 2006, its pseudo-regulatory functions had to be split off into a second private institution, the one that Schapiro heads, which was created in 2007 out of a merger with the National Association of Securities Dealers.
But the "Financial Services Regulatory Authority" is not a public body; it has little transparency, and if you have not heard of Mary Schapiro, it is because she has not been much of a player, much less a crusader, in the struggle for reform. She is the kind of Democratic appointment that allows Wall Street to breathe a huge sigh of relief.
And of course, her appointment is no accident. There were much tougher, more public minded appointees for SEC chair on the short list, but they were blocked by fierce industry lobbying warning that tough regulators would be divisive or controversial -- which they indeed would, if they did their jobs. Wall Street fundraisers for Obama used their ample access to resist a tough appointee. People in other power centers, like the Treasury and the White House, did not want a tough and independent SEC. If you think the appointment process exists in some kind of platonic post-ideological vacuum, get real.
http://www.prospect.org/cs/articles?article=a_tame_regulator_for_the_sec