Levitt: ‘SFC’ Should Replace SEC

During the past three weeks, many of the financial world’s heaviest hitters have been lining up at the plate to take their cracks at crisis fixes. These “How to Restore Confidence in Our Markets” op-eds contain serious and interesting ideas, but their fast-and-furious publication leaves readers little time to digest their key points. These high-level regulatory (or de-regulatory) fixes need to be distilled into a series of flash cards to help puzzled decision-makers conduct useful apples-to-apples comparisons.

On that score, here’s how the first of several swings at a solution breaks down:

Architect: Arthur Levitt
Credentials: Former SEC Chairman
Publication: The Wall Street Journal, Oct. 22, 2008
Problem: An adherence to a deregulatory approach to the explosive growth and expansion of America’s major financial institutions.
Culprits: A regulatory system that failed to adapt to “important, dynamic and potentially lethal new financial instruments.”
Response: Merging the SEC with the Commodity Futures Trading Commission (CFTC); this “Securities Future Commission (SFC)” would oversee “markets (OTC, securities, boards-of-trade, and municipal debt), broker-dealers, commodities merchants, investment banks (as boutique firms arise to fill the current void), accounting standards, rating agencies, mutual funds, corporate reporting, and the clearance and settlement systems.”
Concerns: Treasury Secretary Henry Paulson’s “Regulatory Blueprint” idea that “advocates gutting the SEC and CFTC of their mandates.”
Strong Words: “Treasury is a political entity controlled by the president – just imagine what our financial markets would look like if controlled by the White House.”