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Former SEC Commissioner Roberta Karmel delivered this moving speech before the ABA’s “Federal Regulation of Securities Committee” recently. It’s worth reading all 9 pages. Here’s an excerpt:

In my opinion, while a background in government is useful, an agency like the SEC needs some commissioners who have had real world experience in business or the private practice of securities law. Nevertheless, we do not need SEC commissioners who do not believe in the mission of the SEC or who would like to take a hacksaw to all government regulation. I am very afraid that the Trump Administration and the Republican Congress will try to destroy the SEC, or in any event, the SEC’s independence.

Today, neither the SEC Chair nor the President seems to enjoy the freedom to choose non-partisan candidates who will be confirmed by the Senate. Qualifications are based on ideological correctness rather than expertise. This has led to very contentious and partisan decision making with many 3-2 decisions, or even worse, 2-1 votes, on important issues. Moreover, the selection of commissioners in this manner results in strong dissents designed to enable affected constituencies to appeal rulemaking to the United States Court of Appeals for the District of Columbia Circuit and prevail by upending new regulations. I am not opposed to dissents; I authored a few when I was a Commissioner, but these were based on principle, not party. Partisanship has been a historical hallmark of some agencies, like the National Labor Relations Board, where labor and management commissioners are often at odds. It was not traditionally the case at the SEC where the agency’s mission is to police the securities markets and protect investors, and where influence by outside political forces once was rare.

In my opinion, partisanship has undermined the SEC’s mission and credibility and made it very difficult for the SEC to complete rulemaking mandated by statute. It took five years for the SEC to complete the bulk of mandated rulemaking under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), in part because Republicans in the Congress and at the SEC objected to many statutory provisions. In the meantime, Congress passed the JOBS Act, which mandated new deregulatory rules, and again the SEC was slow to pass rules implementing this law because Democrats found it objectionable. When the agency operated in a collegial manner, I believe it was more effective and respected and was able to pass rules without so much rancor.

By the way, Politico ran this profile on former SEC Commissioner Paul Atkins, who is leading Trump’s transition efforts in the financial regulatory area & whom met with the President-Elect yesterday…

Sen. Schumer: “Have Votes to Block Dodd-Frank Repeal”

Here’s the intro from this Bloomberg article:

Incoming Senate Minority Leader Chuck Schumer, drawing a line in the sand for the next administration, said he has the votes to stop President-elect Donald Trump from repealing the Dodd-Frank Act and “the rules we put in place to limit Wall Street.” Schumer predicted that the Senate’s Democratic minority would get help from Republicans in any such fight. “We have 60 votes to block him,” Schumer said in an interview on NBC’s “Meet the Press.”

The Jawing Over “Midnight” Rulemaking

As noted in this blog, a few weeks ago, House Majority Leader Kevin McCarthy sent a letter to government agencies warning them against finalizing any pending rules or regulations in the waning days of the Obama administration. SEC Chair White testified before the House Financial Services Committee that same day & said that there would not be any last-minute rulemaking before she leaves. Then, the House passed legislation – “The Midnight Rules Relief Act” (HR 5982) – that would amend the Congressional Review Act. It’s doubtful that President Obama would enact this if the Senate passed the bill too.

Here’s the intro from this WSJ article by Andrew Ackerman:

Financial regulators are scrambling to complete a series of unfinished rules designed to rein in Wall Street, dismaying congressional Republicans and some business groups that have urged policy makers not to rush new regulations as President Barack Obama’s term winds down. The government’s consumer finance watchdog is pushing to finish a contentious measure that could make it harder for financial firms to force consumers into mandatory arbitration. The Federal Reserve and the Securities and Exchange Commission could each wrap up postcrisis measures that would force banks and swaps dealers to add to their books costly new buffers protecting against big losses during periods of market distress. The SEC also wants to limit risky derivatives in mutual funds sold to the public, while a fellow market regulator wants to adopt new curbs on speculation in oil, gold and other commodities. Other high-profile measures are in doubt. Mr. Obama has for two years pushed a committee of agencies to complete limits on executive compensation, aimed at curbing Wall Street risk-taking. The six agencies required to write the rules are racing to complete them but may run out of time before the change in administration, according to regulatory officials.

The efforts to complete the rules before President-elect Donald Trump takes office on Jan. 20 buck calls from Republicans who want the agencies to wait, even on noncontroversial measures required by the 2010 Dodd-Frank financial overhaul, until the new administration takes over. “This type of ’midnight rulemaking’ is neither conducive to sound policy nor consistent with principles of democratic accountability,” Texas Rep. Jeb Hensarling, chairman of the House Financial Services Committee, told SEC Chairman Mary Jo White at a Nov. 15 hearing. Mr. Hensarling is reportedly under consideration to serve as Mr. Trump’s Treasury Secretary.

Regulators deny they are rushing to finish initiatives ahead of the transfer of power and say they are merely working through their normal process to finish rules that were targeted for completion this year. Ms. White, who plans to leave the agency in January, told lawmakers she is finishing rules she had long publicly described as top priorities.

Before Mr. Trump’s surprise win earlier this month, some financial firms and their lobbying groups backed the regulators’ efforts to complete their work. At the time, these groups assumed a victorious Hillary Clinton, under pressure from progressive Democrats like Massachusetts Sen. Elizabeth Warren, would adopt a more adversarial approach to Wall Street oversight than the Obama administration. With Mr. Trump’s victory, however, they anticipate policy makers who favor a lighter regulatory touch will be appointed.

– Broc Romanek