Weight of the world on Schapiros shoulders

Date: Thursday, January 8, 2009
Author: Hedgeweek.com

As Mary Schapiro makes her way through the financial shambles and the regulatory malfunctions of 2008 as the proposed new head of the Securities and Exchange Commission, all sorts of problems await her.

With the SEC already under fire for its role in the collective failure to identify the problems lurking before the US financial system started to unravel, the agency has now been confronted by its manifest inability to identify a host of warning signs that might have alerted it to the massive fraud apparently committed by Bernard Madoff, signals that were evident to other participants in the market.

The SEC's reputation is already significantly damaged, and many observers believe it will take a great deal of hard work to put right the failings that have been exposed over the. But assuming Schapiro is confirmed by Congress as SEC chairwoman, there is no doubt that she has the regulatory experience to succeed.

For a start, she has plenty of experience of the SEC, having been appointed as a commissioner by President Ronald Reagan in 1988. Six years Bill Clinton named her as head of the Commodity Futures Trading Commission, the agency that regulates US futures trading. Schapiro became head of regulation at the National Association of Securities Dealers in 1996 and subsequently became its chairman and chief executive, before overseeing the NASD's merger with the regulatory arm of the New York Stock Exchange and becoming head of the new organisation it produced, the Financial Industry Regulatory Authority.

Observers say she is in general an excellent candidate, not only familiar with the securities industry from the regulatory side but aware of its business imperatives, although there is some carping about Finra's own role in the debacle of the past 18 months. Does Schapiro have what it takes to rebuild the US regulatory system? Only time will tell.