December 18, 2008
"Forward, the Light Brigade!"
Was there a man dismay'd?
Not tho' the soldier knew
Someone had blunder'd:
Their's not to make reply,
Their's not to reason why,
Their's but to do and die:
Into the valley of Death
Rode the six hundred.
The Charge of the Light Brigade, Alfred, Lord Tennyson
Former Secretary of Defense Donald Rumsfeld infamously said "As you know, you go to war with the army you have, not the army you might want or wish to have at a later time." You only need to visit military cemeteries and Veteran's Administration hospitals to comprehend the stupidity, if not true horror, of that quote. Inadequate vehicle armoring. Insufficent numbers of and defective combat vests. Failed tactics. Failed strategy. Still, one thing remains constant: young men and women get sent into war and they defend their country with great courage, while politicians and officers far removed from combat posture and pose for the cameras.
In listening to the unseemly jousting between former SEC Chair Arthur Levitt and current SEC Chair Christopher Cox over where to point the finger of blame for the SEC's apparent failure in the Madoff affair and other similar lapses, we are told that the SEC lacks adequate funding. Lacks staffing. Lacks support. Is overwhelmed with work. We are asked to believe by career regulators and career politicians that the solution to the SEC's failures is a simple one: more money. As if bureaucrats ever have any other suggested fix! It's always the same refrain: more money, more money, more money. Well guess what---the refrain of these times is to make due with less and to get more out of it. Yeah, it's tough, but it's not anything new for the private sector. It's the challenge of productivity and rational planning--concepts apparently foreign to career regulators. In Washington, DC the art of the "sound bite" is now a substitute for competency. And all those appointed Chairs and Commissioners and Secretaries, well, they continue to blunder while their subordinates ride into the valley.
Well, guess what, fellas, we all need more money and if you folks had done your jobs, maybe there would be a bit more cash around for the rest of us. Oh sure, from time to time, these regulator types go before Congress and moan about the lack of funding or how they need more staff; and the response is typically tepid or a rebuke. And that's generally the end of the wailing.
The challenge of regulation was best stated by the theologian Rheinold Neibuhr:
God grant me the serenity to accept the things I cannot change; the courage to change the things I can; and the wisdom to know the difference.
This might be a fine time for those running or seeking to run our nation's regulators to start drawing lines and accepting some rational limits before they burn out their staffs and unleash yet more havoc on the investing public. What we don't now need are those who when handed command, blindly accepted the situation on the ground. If you didn't make the effort to remedy things on the job, don't parade around afterwards with suggestions that you didn't implement. Similarly, don't start pointing the finger at your subordinates for whatever failure comes into public display after you gave them the Rumsfeld speech. You chose to go to war with the army you had. Now, don't complain about your troops.
I am a former regulator. I was frustrated in that role by the organizational politics that suffocated my efforts to aggressively pursue my caseload and by the entrenched cronyism that too often promoted those who were toadies and sycophants over those who came in early, went home late, and gave their all to the task of regulation. There are many good folks still in regulation. There are many industry veterans willing to do a turn in regulation. The challenge for the SEC, for the CFTC, for FINRA, for all regulators is to promote and reward those most deserving, and to attract skilled, qualified, veteran staff, and to retain them with fair pay and rewarding work.
All of which brings us to today's announcement that Mary Schapiro will be the next SEC Chair. At first blush, there are a lot of things I could say. Many positives and some negatives. I heard Charles Gasparino's comments on CNBC this morning and can't say that he's off base on many of his points. Gasparino thinks it's a bad choice--more of the same old tired crop of regulators with their now discredited approaches (and he says that she's being pushed by none other than former SEC Chair Levitt).
On the other hand, I actually know Mary Schapiro--I've met her, I talk to her, we have exchanged emails--and she is a very skilled, intelligent regulator with an amazing history of accomplishment. Unfortunately, she and I have often crossed swords during her tenure at NASD and now FINRA, and we have certainly disagreed about how her organization dealt with (and deals with) dissent within its membership.
Is there anyone more qualified than Schapiro for the SEC's top job? Probably not--she's former CFTC, SEC, NASD, and FINRA, which will likely prove a very useful panorama. Still, are we getting yet another career regulator from the same mold that produced Levitt and Cox? Is this the much bally-hooed "change" we were told to expect from the Obama administration?
I am holding the scale before me and see it wobbling up and down as it balances Schapiro's track record against the internal politics that remains at FINRA, her professional demeanor against her hardball response to dissent, her promise of reform against the uneven FINRA history of regulatory favoritism for the big and powerful. This is a tough call. Let me think on it a bit more.