Turnaround at the SEC

Posted by Norb Vonnegut on 1/25/10 • Categorized as Capital Markets

At SEC, a Scholar Who Saw it Coming

I’ve been tough on the SEC. Talked about their incompetence. Blogged (or is it blahhed?) about their failure to catch Bernie Madoff, even after Harry Markopolis served him up. Now, I’m thinking the commission has turned the corner. That the SEC, under the leadership of Mary Schapiro, is getting it right.

Schapiro recently hired Henry Hu, a college professor, to run a new division focusing on risk. My first thought was: Disaster. The last thing we need is a college professor chasing hooligans on Wall Street. And he’s a Yalie.

My second thought was just as critical as the first: Why can’t we get somebody from the trenches, somebody who knows where all the dead bodies are buried? Forgive the expression. I write thrillers in addition to these columns on Acrimoney. But read what Hu has to say. I’m paraphrasing:

“Low-probability catastrophic events can kill banks.” Hmm. That sounds like something we’ve seen.
Some derivatives turn banks into “empty creditors” that don’t care whether debtors survive or fail. Yikes. I thought banks look for borrowers that can repay their loans.
Wall Street bankers downplay the risks of new products, which generate fatter profits than the tried-and-true securities. Wow. Hu sounds like an insider.

Look, one hire doesn’t transform an agency. Who knows how effective Hu will be? But the SEC’s actions at Galleon impress me. And I like the way Hu thinks. So I’m putting it out there—my cautious optimism that Mary Schapiro is turning things around.

What do you think about the SEC?

Norb Vonnegut

About the author

Norb Vonnegut wrote 178 articles on this blog.

Do you ever feel the financial news makes no sense? Do stories leave you with more questions than answers? I created Acrimoney to discuss Wall Street’s behavior behind the headlines. As a veteran of a wealth management business that exceeded $1 billion in assets, I offer insight into the people and the “doings” that affect your money. I’ll start the discussion. But I hope you’ll jump in and say what you think.