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.