Mary Schapiro, Barack Obama, the S.E.C., Madoff, and you

Mary Schapiro, Barack Obama, the S.E.C., Madoff, and you

Mary Schapiro, a veteran and diligent regulator if ever there was one, is Barack Obama’s choice to head the Securities and Exchange Commission. It is a choice that should please those who hope the S.E.C. can recover from what must be the worst year in its history.

Ms. Schapiro has been around Wall Street regulation for decades. She worked at the Commodities Futures Trading Commission as a staff member in the early 1980s, then became a member of the S.E.C. and chairwoman of the C.F.T.C. She helped clean up Nasdaq and now runs Finra, the industry self-regulator. She has been appointed to jobs by Republicans and Democrats.

She will have to take a leading role in shaping the new regulatory system to replace the one that failed so badly. The bank regulators also have much to answer for, and it was the Federal Reserve that championed doing nothing about the shadow financial system that has now brought down the economy. But somehow the Fed has emerged as likely to take control of the regulatory apparatus when it is redone, while the S.E.C. has lost clout and reputation.

Ms. Schapiro showed herself a skilled infighter when the regulatory operations of the N.A.S.D. and the New York Stock Exchange were merged into Finra, a deal designed in part to reduce overlapping rules that raised costs for Wall Street. She emerged on top of the combined organization.

Unfortunately, I have no positive news on the matter of Madoff’s enormous Ponzi scheme that caused investors to lose 50 billion dollars. This one leaves many shaking their heads as to what they might’ve done differently as Madoff vetted out extremely well as the advisor to President Bush and having excellent credentials.

The same is true, sadly, for most investors right now: wondering what they might’ve done differently investment-wise to possibly have minimized their current losses. Going forward from times such as these, the “herd mentality” prevails where people’s confidence in themselves is shaken to make good decisions as well as their confidence in financial institutions. Thus, people want to “follow the herd” and do whatever most others are doing right now investment-wise. This behavior actually goes all the way back to our caveman roots. We stood a much better chance of bringing down a mastodon and having food for the winter if we banded with others and hunted as a herd. Please check out the impulses of your survival instincts with your investment advisor. Need a referral to an investment advisor? Contact me.


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