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“A Blow to Mary Schapiro”

Posted by Larry Doyle on September 24, 2010 8:20 AM |

The battle for truth, transparency, and integrity within the ring of our economic landscape is nothing short of a 15-round heavyweight brawl. With many rabbit punches thrown by those embedded in the Wall Street-Washington incestuous relationship parried and countered by those who want the aforementioned virtues, this encounter would be great entertainment if it were not so serious and impactful on our nation’s well being. Breaking news last night clearly had the judges giving the most recent round in this pugilistic engagement to those in the transparency corner. Let’s wind the tape and get after it.

With news that both Houses of Congress have now voted to repeal the SEC’s exemption from FOIA (Freedom of Information Act) requests, our ongoing pursuit of truth, transparency, and integrity won a round — but not yet the fight — yesterday. For those unaware of this story, I will offer some highlights, add some between round commentary, AND then ask the hard hitting questions you will most assuredly not see elsewhere.

Let’s navigate as Fox Business reports, House Passes Bill to Repeal SEC FOIA Rule, Sends to Obama:

The U.S. House of Representatives passed a bill late Thursday that would undo a controversial provision of the Wall Street reform law that allows the Securities and Exchange Commission [SEC] greater control over the information it shares with the public.

The bill, which was introduced by Rep. Darrell Issa (R-Calif.) on September 15, will now be sent to President Obama for final approval.

The FOX Business Network first brought the provision – formally known as section 929I of the Dodd-Frank Wall Street Reform and Consumer Protection Act – to the public’s attention in July, after the SEC cited the new law in a FOIA action brought by the network. The provision grants the SEC the right to not “disclose records or information” that are typically the grounds for Freedom of Information Act requests.

Following the House’s action Thursday, House Financial Services Committee Chairman Barney Frank recognized the role Fox Business played in bringing the provision to light:

“This provision was included in the Dodd-Frank legislation after having been public for some time. Only after Fox Business News brought its lawsuit did people become aware of the provision’s negative implications,” he said in a statement. “We immediately scheduled a hearing and got bipartisan agreement that a legislative remedy was necessary.”

Is that how this works? If not for Fox News, our nation would be stuck with a horrendously drafted and executed package of Financial Regulatory Reforms? Call me suspect. How often does bad legislation get through without media exposure? How often will the media itself choose not to pursue and expose massive stories inside and outside of Washington? All credit to Fox News on this story, but there is a lot more going on here. Let’s navigate further as The Wall Street Journal offers, House Votes to Repeal Exemption on SEC Secrecy:

The House voted Thursday to repeal part of the recently enacted financial overhaul that allowed the Securities and Exchange Commission to keep secret some information it gathers during examinations, in a blow to SEC Chairman Mary Schapiro.

Given all that has transpired on Wall Street and in Washington leading up to and throughout our economic crisis, I have long felt that no one single individual could shed more insights on the Wall Street-Washington incest that eroded our economic and financial foundation than former FINRA head and current SEC chair Mary Schapiro.

The language was “a recipe for more coverups at the agency that failed to catch Bernie Madoff,” said Angela Canterbury, director of public policy at the Project on Government Oversight. “Congress has done well in removing this cloak of secrecy that was sought by the SEC.”

Bingo!! I totally concur. Ms. Canterbury and former SEC lawyer Gary Aguirre deserve enormous credit for exposing the enormous perils of not repealing this FOIA exemption.

The agency attempted to assuage lawmakers’ concerns by issuing guidance last week that would limit the staff’s ability to keep information secret. But lawmakers of both parties weren’t persuaded.

That jab by the SEC was easily swatted away.

Now that the rock has been rolled away from the front of the SEC’s cave, the questions remain:

1. Who drafted this piece of the Financial Regulatory Reform? What was the thought process? What were the influences?

2. How does language like this exemption get into the legislation in the first place? Do legislators read the total bill before voting?

3. We have heard from Barney Frank. Where is his co-sponsor of the Financial Regulatory Reform legislation, Chris Dodd (D-CT)? What does he have to say? Did he draft the language protecting the SEC?

4. What is the SEC really trying to hide? Was the SEC merely trying to garner some seemingly proprietary information from those it oversees? Really? Come on now? I strongly encourage you to read and review the treatise written by Gary Aguirre embedded in my commentary last weekend, Great American Gary Aguirre “Cross Examines” in re: SEC’s FOIA Exemptions.

5. What about the SEC’s oversight of FINRA, Mary’s former haunt? Was Mary looking to ‘pull the curtains’ on any requests for information into that organization?

Those who love truth, transparency, and integrity may have won this round, but we will certainly ‘keep punchin’ because this donnybrook is far from over!!

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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