Dream choices for the SEC

Simon Johnson has a hopeful – or hopelessly optimistic, if you will – piece about candidates for the top SEC job who might actually enforce stricter regulations. Mary Schapiro, of course (these are my words, not his) has been a disappointment bordering on a disaster, and now the SEC is embroiled in a sex scandal, of all things.

The decline of investor confidence in the stock market and in securities markets in general is unhealthy for our economy. It would be a big help if the SEC could be more vigorous in policing the markets and not settle for just tackling the small fry. It may be that Johnson has identified someone who could do this.

Johnson, an MIT professor and former chief economist for the IMF, has been a ferocious opponent of the big banks and his choices for the SEC job reflect his desire to rein in Wall Street practices. But I think they are great choices; I only wish the chances were better that any of them would get appointed. President Obama has not had a lucky hand with his choices in the economic sphere. He gets bad advice and doesn’t know that it’s bad.

That said, Johnson’s first choice, former Sen. Ted Kaufman of Delaware might have a chance because he was the longtime staffer for Joe Biden who filled out the two years of his term when Biden became vice president.  During his brief tenure in the Senate, Kaufman argued that banks were too big and in general advocated for comprehensive financial reform.

Johnson’s second choice is another hero of mine – the former special inspector general for the bank bailout program, Neil Barofsky. In some ways, Barofsky, a career prosecutor, might be an even better choice because the SEC really needs to be primarily prosecutorial. However, the current chief enforcement official, Robert Khuzami, also comes from a prosecutor background and has been another huge disappointment.

I hadn’t heard of Johnson’s the third choice, Dennis Kelleher, before but I’m willing to take his word on it. Johnson describes him as “a former senior Senate leadership aide with a great deal of political experience, including during the financial crisis and in the negotiations that led to Dodd-Frank, and now runs the pro-reform group Better Markets.”

Much of Johnson’s hopefulness rests on the belief that Obama, having been snubbed by Wall Street donors in this campaign cycle, will feel free to clean house. I think he underestimates Obama’s need to be liked by these rich people. There are already reports that he wants to mend fences with Wall Street, so, sadly, I expect any eventual SEC appointment to be one of those revolving-door types Johnson wants to avoid.

Bernanke as cheerleader

Fed chairman Ben Bernanke gave a carrot and stick speech to encourage lawmakers to reach a deal on the fiscal cliff, the term he coined to describe the automatic spending cuts and tax hikes due to take effect at the end of the year. The carrot was that 2013 could be a good year for the economy if a fiscal agreement is reached quickly and amicably. The stick is that uncertainty is stifling the economy and failure to reach an agreement would further sap confidence in addition to the actual harm of the fiscal contraction.

Bernanke didn't do the country any favors by coining this term. It's fine if he wants to describe the limits of what monetary policy can do, but he has no business prescribing what politicians should do. In fairness, he is not dictating actual terms but by preaching the need for a "solution", he implies that the fiscal cliff is a problem and not a choice. He is providing political cover for deficit hypocrites, who say they want to reduce the deficit, but balk at the impact of a program that actually does it.

U.S. to become top oil producer

Skyrocketing production of shale oil and gas will help propel the U.S. ahead of Saudi Arabia and Russia to become the world’s largest oil producer by 2017, the International Energy Agency said in a new report today. But environmental questions on fracking need to be resolved and continued development needs to be part of a comprehensive energy strategy. A good starting point in the second Obama term would be to revamp the DOE so that it is genuinely focused on real energy needs and not on nuclear resource management and to appoint a new secretary who knows something about oil and gas.

More Greek tragedy

The Greek government took another step toward collapse after the three-party coalition barely eked out support for new austerity measures amid defections and expulsions of party members who refused to go along with policies that look more and more like economic and political suicide.

The vote followed a 48-hour "general strike" that was more like a riot as the hapless Greek politicians followed a script written by the rigid and benighted Germans. Wolfgang Schaueble deemed it unlikely euro zone ministers would be able to release the next installment of bailout funds at their meeting next week.

The new round of brinkmanship in Greece has hit markets on both sides of the Atlantic. The revival of the euro crisis with the post-election focus on the fiscal cliff in the U.S. has created a double whammy for stocks.

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A blog on the global economy – U.S., Europe, Asia, wherever. A blog with equal appeal to business professionals and educated laymen, reporting and analyzing how events here and there affect our wallets and pocketbooks. Terrorist attacks in Nigeria increase gas prices here; a bank collapse in Italy impacts credit conditions in California; a strike in China affects the availability of minimum wage jobs here.