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Mary Schapiro Meet Stump Merrill

Posted by Larry Doyle on April 16, 2009 4:30 PM |

President Obama was elected primarily on one theme: change. Many private and public sectors need change, but perhaps none more than our banking and regulatory oversight. Barack said as much in late February:

Obama leveled a broad indictment of the industry, saying the current financial crisis occurred when “Wall Street wrongly presumed the markets would continuously rise and traded in complex financial products without fully evaluating their risks.” But he also blamed government regulators for not adequately protecting consumers.

Obama further offered:

“strong financial markets require clear rules of the road, not to hinder financial institutions, but to protect consumers and investors, and ultimately to keep those financial institutions strong.”

To this point, who could not agree with Barack’s assessment and designs. However, if we go back to mid-January, why did he select the head of the Wall Street self-regulatory organization, FINRA, to oversee the SEC? FINRA has been widely critiqued for being soft on overseeing the very institutions at the heart of our current economic disaster.

Again today, we hear about FINRA’s incompetence in a Bloomberg report on the investigation of Stanford Financial. Bloomberg reports:

From 2003 to 2008, at least five former Stanford employees publicly accused the company of wrongdoing, including the two who alleged a Ponzi scheme. During that period, Schapiro, now 53, held various senior positions at Finra, based in Washington, and its predecessor, the National Association of Securities Dealers, ultimately becoming chief executive.

“With Finra, that’s a shocking failure,” said Solomon Wisenberg, a former federal prosecutor who is co-chairman of the white collar crime group at Barnes & Thornburg LLP law firm in Washington.

While FINRA views the Stanford case as being on the limits of its jurisdiction, former Stanford employees and a former regulator have a decidedly different view of FINRA and its actions. The Bloomberg article, Stanford Coaxed $5 Billion as SEC Weighed Powers, offers this comment from William Black:

“This is an abject failure of anything akin to self- regulation,” said William Black, a University of Missouri law and economics professor in Kansas City and a former U.S. bank regulator. “These are people from the industry who cannot see their brethren as crooks.”

In the face of such massive abuses in the financial services industry, how is it that Obama selected the consummate insider to head the SEC?  Mary Schapiro may be a longstanding company person, but the track record of FINRA does not lie. Time and time again, we hear strong criticisms by extremely credible financial professionals about Ms. Schapiro and FINRA.

While Ms. Schapiro may have had a longstanding career as a regulator, it does not necessarily mean she is qualified to manage the major league club.  Barack saw fit to replace a longtime auto executive Rick Wagoner as head of GM.  The Bush administration saw fit to replace the heads of failed institutions such as AIG, Freddie Mac, and Fannie Mae.

Why did Barack promote Mary Schapiro? Is this promotion of Ms. Schapiro the equivalent of Stump Merrill getting a major league managerial position? Who is Stump Merrill, you may ask?

Stump Merrill is the ultimate “company man” for the New York Yankees. He was manager of a number of minor league teams throughout the Yankee organization. Finally promoted to the major league job in the early 90s, Stump lasted all of a year and a half  with a very dismal record. Final assessment on Stump’s major league stint? He was in over his head.

The head of the SEC is too important a position at this time in our country’s history to anoint a person with a checkered track record who just may happen to be a good company person.

While Wall Street executives may be very happy with Ms. Schapiro in that role, how about everybody else?

LD






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