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The Muammar Gaddafi of Regulation

Posted by Larry Doyle on May 26, 2010 9:14 AM |

Does anybody still read Time magazine?

I would expect that Time is likely now relegated to 9th grade Civics classrooms given the depth of reporting embodied in the recent cover article, The New Sheriffs of Wall Street.

If Time would like to be considered a serious publication, they should dig a little deeper prior to reporting this sort of powder puff commentary. Time rightfully does address the fact that Wall Street has been a bastion of male domination. Additionally, they pay proper respect to FDIC Chair Sheila Bair and Tarp watchdog and consumer advocate Elizabeth Warren, but they fall woefully short in their characterization and review of SEC Chair Mary Schapiro.

In this article, Schapiro would clearly like to portray herself as tough as nails on Wall Street while protecting the interests of investors. As Time highlights:

Taped to the door of Mary Schapiro’s office on the top floor of the SEC building is a piece of paper that reads, “How Does It Help Investors?” The maxim is meant not just as a lodestar for her agency but also as a repudiation of its recent past.

When she arrived at the agency, she was far more direct. “I’ve been called the Muammar Gaddafi of regulation,” she told a reporter.

Protect investors? Muammar Gaddafi? Are you kidding me? Perhaps Time should have reviewed Sense on Cents/Mary Schapiro, or called Bloomberg’s Susan Antilla prior to publishing this puff.

High five once again to Susan Antilla for real reporting as she tells it like it really is this morning in writing, This Wall Street Lady Enforcer Shoots Blanks:

Pop quiz: Name the person who doesn’t belong in the category of Tough Lady Sheriffs Who Scare the Bejesus Out of Wall Street.

1) Mary Schapiro, chairman of the Securities and Exchange Commission.

2) Sheila Bair, chairman of the Federal Deposit Insurance Corp.

3) Elizabeth Warren, chairman of the Congressional Oversight Panel on the Troubled Asset Relief Program.

If you didn’t choose No. 1, you’ve got a short memory.

Schapiro, the nation’s top securities regulator, is getting lumped together with women known for cleaning up Dodge. Her record, though, includes overseeing an agency where brokers were embraced as part of the regulatory team and aggrieved investors were corralled into a private, back-room justice system.

Still, I wonder whether Schapiro is an investor advocate in the spirit of an activist like Warren, or just a really good politician who slides into populist posture when the times demand, then relaxes into business-advocate mode when headlines shift.

As I have long held out, Mary Schapiro is the one single individual – more than any other in our country today – who could blow the cover off the fraud that ensued on Wall Street. She did not have to wait to become head of the SEC. As head of FINRA, Schapiro had a huge bully pulpit to protect investors and take on the industry. The record shows she failed miserably.

Take on the industry? As Susan Antilla addressed today and also last December, the evidence in the Standard Chartered v FINRA suit would seem to clearly indicate that Mary lied verbally and in a proxy statement on behalf of her personal interests, her fellow FINRA execs, and the major Wall Street banks against the interests of smaller broker-dealers. (This past February, Judge Jed Rakoff granted FINRA absolute immunity in this case. Does FINRA get to operate above the law in a financial transaction? I guess they do!!)

Protect investors? How about those investors trapped in auction-rate securities? How did Mary protect them? She didn’t. FINRA, under Mary’s watch, was more concerned in protecting its own portfolio which held and then liquidated its own auction-rate securities position in 2007, mere months before that market totally froze. $150 billion ARS remain frozen.

Muammar Gaddaffi? If Mary is Muamar Gaddafi, then her friends on Wall Street are nothing short of Kim Jong-il, Bashar al-Assad, and Robert Mugabe.

If Mary does not like that company and would like to be seriously considered as an advocate for investors, then she can start with one very aggressive move. What move might that be? Mary Schapiro should charge the SEC’s OCIE to fully investigate and expose all of the details surrounding FINRA’s liquidation of its auction-rate securities position in 2007. That request would take real courage. I asked that very question a year ago in writing, “How Courageous Is Mary Schapiro?”

Unless and until she does that, Mary Schapiro and the SEC will be nothing more than a cheap charade.

Class dismissed.


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