Should Obama Fire the SEC Chief?

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The Securities and Exchange Commission (SEC) was set up in the 1930s to oversee U.S. markets and protect investors. It promotes transparency and efficiency in the creation and trading of stocks, bonds, and other financial assets. This month, SEC Chair Mary Jo White has come under renewed fire from Senator Elizabeth Warren (D — Mass.). Warren has called on President Obama to find a replacement head for the SEC. The senator has accused White of failing to uphold the agency’s integrity.

I. Elizabeth Warren

Elizabeth Warren is perhaps the nation’s leading champion of Wall Street reform. She has argued for more than a year that SEC Chair Mary Jo White is undermining Obama administration post-recession reforms by putting corporate interests over those of ordinary people. Warren is especially incensed by White’s refusal to make transparent all forms of political spending by corporations. The senator believes White’s inaction is perpetuating a system dominated by the super-wealthy by allowing them undue influence in politics. This influence, Warren believes, increases the risk of insiders causing another economic crisis. The senator notes that, apart from failing to pass meaningful transparency, the SEC has created new rules that actually eliminate other spending disclosures. “The only way to return the SEC to its intended purpose,” Warren wrote to Obama, “is to change its leadership.”

II. Barack Obama

President Obama, through his spokespeople, has defended Mary Jo White, calling her “the right leader” for the SEC. During White’s tenure, the administration has noted, the SEC has broken records in the amount of fines it has handed down and the number of cases it has enforced. White has also overseen a slate of new rules that, the president believes, have fundamentally improved transparency and market functionality since the Great Recession. The rules include crackdowns on trading of riskier assets and other means of preventing insiders from abusing their power and putting ordinary investors at risk. Other supporters of White have criticized the timing of Warren’s latest call for new political spending rules. Because it is an election year, the SEC is currently prohibited by law from creating such rules.

III. Roger Lowenstein

Roger Lowenstein is a prominent author on finance and a director of Sequoia Fund. He argues that Warren’s calls for political spending disclosures fall outside the scope of the SEC’s charter. By calling for the head of the SEC chair, Lowenstein believes Warren is overstepping her senatorial role and wrongfully assuming the role of “unelected regulatory czar.” Furthermore, Lowenstein says that Warren is trying to politicize the SEC to bring it in line with her liberal agenda. The SEC is tasked with protecting the interests of investors, he notes, not diminishing corporate power. Lowenstein advises the senator to stop “political grandstanding” and instead push Congress to better fund the SEC. This, he says, would empower the agency to eliminate insider trading and otherwise ensure transparent and secure markets for those seeking to invest in America.

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Further Reading: CNN Money / Boston Globe / New York Times

This brief was written by Jared Metzker.

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