Will Obama's 'Change' Extend to the SEC?

At the SEC, financial reform’s proponents fear a missed opportunity.

WASHINGTON, DC - MAY 22: Securities and Exchange Commission Chairman Mary Schapiro (L) and Futures Trading Commission Chairman Gary Gensler testify before the Senate Banking, Housing and Urban Affairs Committee about derivatives reform in the Dirksen Senate Office Building on Capitol Hill May 22, 2012 in Washington, DC. The committee questioned the regulators about 'reducing systemic risk and improving market oversight' in the wake of the Dodd-Frank Act.
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Then there's the fellow that some progressives privately describe as their "dream" candidate, former Delaware Sen. Ted Kaufman, who once chaired the Congressional Oversight Panel, charged by TARP legislation with keeping an eye on financial markets. Johnson's promotion of Kaufman may have been the spur for a petition on the blog Credo Action endorsing Kaufman and the others named above for the SEC chair.

Some think Johnson himself would be a good candidate. The SEC's chief needs "a good theoretical foundation for understanding the difference between what's good for traders and what's good for the economy. Those are two different things," says Wallace Turbeville, a senior fellow at the progressive think tank Demos. "Someone like Simon would clearly bring that to the table. Perhaps Neil Barofsky as well."

It's not clear, though, that any of them are interested. Kaufman, for one, says he's not. "I'd rule myself out," he said in an interview. "If this were 20 years ago I'd do it, but that's not where I am in my life. I'll be a great cheerleader. I'll help any way I can. But there's a whole bunch of good people out there." (Including MIT's Johnson: "I will be the first to nominate Simon," says Kaufman.)

Even if Kaufman, Johnson or the others were willing, what are the odds of the administration nominating them? "I'd love to be wrong but I'd say the odds are somewhere between slim and none," says the Consumer Federation's Roper. "I don't think they'd want someone they can't control, someone who doesn't share their very moderate, middle-of-the-road ideology on investor-protection issues in that position, sad to say."

One might imagine that a re-elected Obama is free to nominate a serious reformer, especially since the financial-services industry largely abandoned him this year anyway for Romney. But it's not just a question of whether Obama has a zeal for reform. It's a matter of what he thinks he can get through the Senate, and how much political ammunition an SEC appointment is worth.

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"There is a limit to the number of areas where they're going to want to fight an all-out battle to get someone confirmed," says Roper, "and I suspect the SEC chairmanship is not one of them."

Maybe Obama will keep Walter on for a full five-year term. "I think she'd be a good choice," says Kaufman. "She comes in, she knows what she's doing. At least it ought to be like an interim coach—give her a shot."

And who knows, maybe she'll be more active than many now expect. Says Demos's Turbeville: "I keep reflecting on the fact that Dwight Eisenhower appointed Earl Warren."