This clip, which recently aired on CNBC, is probably the best insight yet into the current mindset of SEC Chairman Mary Schapiro, with respect to enforcing laws against illegal market manipulation.
- [00:25] “Anybody who was manipulating the market or spreading false rumors potentially was violating the securities laws.”
Potentially?(!) Isn’t market manipulation, by definition, a violation of the securities laws? Wasn’t the SEC itself created to restore public confidence in fair (meaning, non-manipulated) markets? I really doubt this is how Chairman Schapiro would have made this point in writing, but the off-the-cuff nature of the response makes it all the more indicative of how her organization really approaches the issue, I’m afraid.
- [00:30] “Even Chairman Cox has said subsequently that the ban on short selling and the other measures the SEC took might not have been the right thing to do at the time.”
On this point, we agree. The ban on legitimate short selling was a ridiculous measure that some evidence strongly suggests was enacted solely to benefit Goldman Sachs and Morgan Stanley.
- [1:29] Here, Chairman Schapiro offers her interpretation of the SEC’s new Rube Goldberg approach to dealing with bear raids. It takes her three dozen words to describe a likely counter-productive attempt to artificially solve a problem that I can naturally solve in six words: “borrow the shares, settle the trades.”
- [2:10] (regarding whether or not manipulation was involved in the take-downs of Bear Stearns and Lehman Brothers) “The review is ongoing and we will go wherever the evidence leads us.”
This made me angry, whereas up to that point, I was mostly amused. It’s been two years since Bear and 18 months since Lehman fell, sparking the largest economic crisis in our lifetimes, and the SEC’s review of is “ongoing”? The SEC “will go where the evidence leads”? This despite signs of illegal manipulation so obvious that former SEC Enforcement Director Irving Pollack compared them to the lights on an airport runway:
“This isn’t a trail of breadcrumbs; this audit trail is lit up like an airport runway.You can see it a mile off. Subpoena e-mails. Find out who spread false rumors and also shorted the stock and you’ve got your manipulators.”
This is insulting. Chairman Schapiro should treat us as adults and admit that the “review” is long over, assuming it ever really began.