As the calendar pages turn quickly toward January 20, 2009, when the reign of the new Obama Administration will begin, many eyes are focused on what happens now at the US Securities & Exchange Commission (SEC).  By federal statute the SEC is the official watchdog for the nation’s securities industry, its authority stemming from Great Depression era legislative measures passed by Congress in 1933 and 1934 and enthusiastically signed into law by President Franklin Roosevelt following each annual session of that 73rd Congress.


Obviously much has changed in the capital markets since then – but some events of 2008 and now moving into 2009 that affect investors sounds strikingly familiar to [some] conditions affecting investors after the stock market crash of October 1929.


There were no federal regulators of the stock markets then, and only a handful of states had securities laws – notably, New York State, where Governor Franklin Roosevelt had some legal instruments to deal with fraud and stock markets chicanery.  The “Martin Act” (1926) was said to be somewhat of a model for the legislation adopted for the national securities laws in ’33 and ’34.  Interesting:  The Martin Act was used by Attorney General Eliot Spitzer to pursue Wall Street’s top investment banks and brokerages houses in recent years.  And the present AG, Andrew Cuomo, is wielding the Act in pursuing wrongdoing in New York State right now.


Given the scope of the wreckage in the domestic capital markets, in equities investing, in the bond markets, in the Madoff Schemeblowup, in banking, in mortgage securitizing, etc. – there are important questions being raised about (1) what to do about strengthening regulation and oversight of the different federal agencies involved in the now very complicated markets under their jurisdictions and (2) who should be the government’s chief securities industry watchdog, in the present or perhaps future regulatory framework.


President-Elect Obama is fleshing out his leadership team and has named his choice for head of the SEC:  Mary Schapiro, head of FINRA (the Financial Industrial Regulatory Authority – the self-governing oversight board of the American brokerage industry, which oversees 5,000 firms and 680,000 registered securities representatives.  The agency has 3,000 employees and mission is “…to protect investors by maintaining the fairness of capital markets.”


Schapiro was an SEC commissioner early in her career; for a brief time was temporary chair of SEC; she later headed by the Commodities Future Trading Commission; and has been head of FINRA.


We commented on some of this in our November 10, 2008 column – “As We Survey the Carnage in the Capital Markets, the 2009 Burning Question Will Be:  What Regulations, and Oversight Are Really Needed Going Forward? (link here:


Now commentary regarding the appointment of Mary Schapiro to head SEC is beginning to shape the coming debate about her capabilities (and SEC’s) to be a tough enough watchdog of the capital markets, and about the future of the SEC itself.  We share with you these two commentaries –


From The Washington Post (January 7th)   Commentator Steve Pearlstein’s views (“Obama’s SEC Pick is No Joe Kennedy”):


And a fast rebuttal from the widely-read The Corporate Blog (edited by Broc Romanek and Dave Lynn): “Incoming SEC Chair Schapiro:  A Rebuttal”


And what about the current head of SEC, Chairman Christopher Cox, as he heads for the exit door?  There has been commentary galore about SEC really being asleep at the switch while Wall Street took the American economy off the cliff with it – “Where Was the SEC?” sums up the headlines.  And about slumbering through the Madoff scandal. See “Rebuilding the SEC” after Chairman Cox leaves in the January 6th The New York Times “Breaking” commentary:


Read, too the excellent commentary by noted bio author Ron Chernow on the need for a tough capital markets investigator/prosecutor in 2009:


Title:  “Where is Our Ferdinand Pecora?”  (He was the former New York prosecutor who paraded Wall Street leaders before the Senate after the 1929 Crash, and his landmark investigative work was an important factor in the 1933 and 1934 federal securities oversight debates.)


Should be an interesting time in our nation’s capital when the congressional oversight hearings get underway in both houses, and the Senate confirmation hearings begin on Obama Administration nominees


And then when everyone is finally in harness, what measures will come to help relieve everyone’s pain and misery from Capital Markets Overload.


The 73rd Congress passed The Securities Act of 1933The Exchange Act of 1934The Glass Steagall Act of 1933 (separating banks and Wall Street firms), The Economy Act of 1933The Federal Emergency Relief Act, The National Industrial Recovery Act, and many more measures, some lasting into the 21st Century and 2009.


What will we see out of the 111th Congress and our 44th President?


All this will be coming to you soon in “Living Color,” on cable channels (they used to say on NBC prime time when the “Walt Disney Hour” was announced).  Hmmm… The Disney Hour…may be an interesting metaphor for some of what is to come in 2009.


Do Stay Tuned!