The sec in a time of discontinuity

Virginia Law Review

Volumn 95, Issue 4, 2009, Pages 667-684

  Seligman, Joel ^a  

^a UNIVERSITY OF ROCHESTER   (United States)

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EID: 69249092660     PISSN: 00426601     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (59)

1. On the SECs origins, see generally Joel Seligman, The Transformation of Wall Street 73-100 (3d ed. 2003).
2. John C. Coffee, Jr. & Hillary A. Sale, Redesigning the SEC: Does the Treasury Have a Better Idea?, 95 Va. L. Rev. 707, 708 (2009).
3. Dep't of the Treasury, Blueprint for a Modernized Financial Regulatory Structure (2008) [hereinafter Blueprint].
4. James D. Cox, Coping in a Global Marketplace: Survival Strategies for a 75-Year-Old SEC, 95 Va. L. Rev. 941, 941 (2009).
5. Frank H. Easterbrook, The Race for the Bottom in Corporate Governance, 95 Va. L. Rev. 685, 685 (2009) (citing Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 (1975);
6. Chiarella v. United States, 445 U.S. 222 (1980)).
7. Id.
8. Donald C. Langevoort, The SEC, Retail Investors, and the Institutionalization of the Securities Markets, 95 Va. L. Rev. 1025, 1026 (2009).
9. A.C. Pritchard & Robert B. Thompson, Securities Law and the New Deal Justices, 95 Va. L. Rev. 841 (2009).
10. See Seligman, supra note 1, at 251 ("In the 280 judicial proceedings completed under the Public Utility Holding Company Act by June 30, 1952, only two were terminated adversely....").
11. See, e.g., Press Release 2008-297, U.S. Sec. and Exch. Comm'n, Statement Regarding Madoff Investigation (Dec. 16, 2008), available at http://www.sec.gov/news/press/2008/2008-297.htm.
12. See Coffee & Sale, supra note 2, at 735-36.
13. See Joel Seligman, The Obsolescence of Wall Street: A Contextual Approach to the Evolving Structure of Federal Securities Regulation, 93 Mich. L. Rev. 649, 654 (1995) (citing S. Rep. No. 73-1455, at 9 (1934)).
14. Inv. Co. Inst. & Sec. Indus. & Fin. Mkts. Ass'n, Equity and Bond Ownership in America 1 (2008), available at http://www.ici.org/pdf/rpt-08- equity-owners.pdf.
15. The day after Lehman Brothers filed for bankruptcy, the Department of the Treasury decided to orchestrate an $85 billion bailout for insurance giant AIG. Lehman Brothers Holdings Files Ch. 11 Petition After Gov't Denies Funding, 40 Sec. Reg. & L. Rep. (BNA) 1476 (Sept. 22, 2008). Congress subsequently passed the $700 billion Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, 122 Stat. 3765 (2008).
16. Blueprint, supra note 3.
17. The impact of this reorganization would be massive: the U.S. insurance industry held assets totaling $6 trillion at the end of 2006; the U.S. banking sector had $12.6 trillion; and the U.S. securities sector was worth $12.4 trillion. Id. at 165.
18. Cyrus Sanati, S.E.C. Nominee Has a Merger on Her Resume, N.Y. Times Deal-Book, Dec. 18, 2008, http://dealbook.blogs.nytimes.com/2008/12/18/sec- nominee-hasa-merger-on-her-resume/.
19. Blueprint, supra note 3, at 5-6.
20. Id. at 6-7.
21. Id. at 98-99.
22. Id. at 99-100.
23. Id. at 100-06.
24. Id. at 126-33.
25. Id. at 106. The Blueprint also recommended that the SEC "use its exemptive authority to adopt core principles to apply to securities clearing agencies and exchanges ... modeled after the core principles adopted for futures exchanges and clearing organizations under the Commodity Futures Modernization Act." Id. at 12. It further recommended that all clearing agencies and market self-regulatory organizations ("SROs") be permitted to self-certify most rulemakings, which would become effective upon filing (though the SEC would retain its right to abrogate rulemakings later). Id.
26. Id. at 13-14.
27. Id. at 146-56.
28. Id. at 17-19.
29. Id. at 170-80. SROs would retain a role. The standards developed by the Conduct of Business Regulatory Agency would apply both to nationally chartered and state-chartered firms.
30. Id. at 21.
31. The Blueprint does include this observation: "In general, margin is a very different concept in the futures and securities worlds." Id. at 116. This was a rare recognition that differences existed, but the Report did not follow through and explain why. Differences in customers, differences in technology, differences in intermediaries, differences in internationalization are contextual factors that may well require differences in regulation.
32. See, e.g., Editorial, Fear of Regulating, N.Y. Times, Apr. 3, 2008, at A26 ("[T]he blueprint was mostly developed before the current financial crisis and accordingly comes across as outdated.").
33. Seligman, supra note 1, at 100.
34. Id. at 97.
35. Staff of S. Comm. on Gov't Affairs, 107th Cong., Financial Oversight of Enron: The SEC and Private-Sector Watchdogs 11 (Comm. Print 2002), available at http://hsgac.senate.gov/100702watchdogsreport.pdf.
36. Id. at 31-32.
37. Seligman, supra note 1, at 116-17.
38. Cf. William L. Cary, Politics and the Regulatory Agencies 4 (1967) ("[Government regulatory agencies are stepchildren whose custody is contested by both Congress and the Executive, but without very much affection from either one.... Without the cooperation of both Congress and the Executive, little constructive can be achieved. To reemphasize the point, an agency is literally helpless if either branch is uninterested or unwilling to lend support.").
39. Report of the Presidential Task Force on Market Mechanisms 55, 59 (1988).
40. Id. at 69.
41. "Black Monday," The Stock Market Crash of October 19, 1987: Hearings before the S. Comm. on Banking, Hous. & Urban Affairs, 100th Cong. 98-99 (1988) (testimony of Alan Greenspan, Chairman of the Fed Reserve).
42. - 2 Louis Loss, Joel Seligman & Troy Paredes, Securities Regulation 1103-40 (4th ed. 2007).
43. See David S. Ruder, Chairman, Sec. Exch. Comm'n, Paper Delivered Before the Economic Club of Chicago, October Recollections: The Future of the U.S. Securities Markets 20-28 (Oct. 20, 1988), available at http://www.sec.gov/news/ speech/1988/102088ruder.pdf.
44. For recent discussions on this sort of proposal, see Rachel McTague, Casey Hails Congress' Consideration of Possible SEC-FTC Combination, 39 Sec. Reg. & L. Rep. (BNA) 1657 (Oct. 29, 2007)
45. and Rachel McTague, SIFMA Advocates SEC-CFTC Merger Under Treasury's Reg Reform Initiative, 39 Sec. Reg. & L. Rep. (BNA) 1840 (Dec. 2, 2007).
46. Advisory Comm. on Smaller Pub. Cos., Final Report to the United States Securities and Exchange Commission 1-8 (2006), available at http://www.sec.gov/ info/smallbus/acspc/acspc-finalreport.pdf.
47. See, e.g., Michael R. Bloomberg & Charles Schumer, Sustaining New York's and the U.S.'s Global Financial Services Leadership 100-04 (2007), available at http://schumer.senate.gov/SchumerWebsite/pressroom/special-reports/ 2007/NY-REPORT%20-FINAL.pdf; Comm. on Capital Mkts. Regulation, Interim Report 5, 12-13 (2006), available at http://www.capmktsreg.org/pdfs/11.30Committee- Interim-ReportREV2.pdf.
48. See, e.g., Richard M. Kovacevich et al., Fin. Servs. Roundtable, The Blueprint for U.S. Financial Competitiveness 29-43 (2007), available at http://www.fsround.org/cec/pdfs/FINALCompetitivenessReport.pdf.
49. See, e.g., Blueprint, supra note 3, at 215-18.
50. Id. at 215, 216.
51. See Seligman, supra note 1, at 457-58 (describing different approaches to net capital at the New York Stock Exchange and the SEC and how then NYSE Rule 325 permitted withdrawal of capital during a shorter period of time than SEC Rule 15c-3-1).
52. Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, 122 Stat. 3765 (2008).
53. To be sure, the Blueprint raises other questions that are not fully addressed. For example, would greater reliance on the Federal Reserve mean less reliance on the Presidential Working Group?
54. See Joel Seligman, Self-Funding for the Securities and Exchange Commission, 28 Nova L. Rev. 233, 253-58 (2004).
55. Securities Exchange Act of 1934 § 4(a), 15 U.S.C. § 78d(a) (2006).
56. See, e.g., Eric Lichtblau, Federal Cases of Stock Fraud Drop Sharply, N.Y. Times, Dec. 25, 2008, at Al (noting that a dramatic decline in prosecutions for securities fraud in 2008 - 133 prosecutions in first eleven months compared to 513 cases in 2002 - contributed "to make the federal government something of a paper tiger in investigating securities crimes").
57. See, for example, the discussion in Coffee & Sale, supra note 2, at 768-73.
58. See Fed Again Invokes Emergency Powers with $37.8 Billion in New Loans to AIG, 40 Sec. Reg. & L. Rep. (BNA) 1643 (Oct. 13, 2008) (reporting an additional $37.8 billion in loans on top of an initial $85 billion lending facility).
59. Press Release 2008-230, Sec. Exch. Comm'n, Chairman Cox Announces End of Consolidated Supervised Entities Program (Sept. 26, 2008), available at http://www.sec.gov/news/press/2008/2008-230.htm.