The SEC and the Consequences of Divisiveness

by J. Robert Brown, for The Race to the Bottom, February 1, 2010.

Anyone who studies the history of the SEC knows that most decisions are made by consensus.  Those days are over.

The difficulty in reaching consensus can be worsened by the existence of representation of both parties on the body.  The five person commission is prohibited by law from having more than three persons of the same party.  See 15 USC 78d (“Not more than three of such commissioners shall be members of the same political party, and in making appointments members of different political parties shall be appointed alternately as nearly as may be practicable.”).  Ordinarily, therefore, the party in the White House gets three seats (and a majority) and the party out of power receives the other two (although there have been cases where the non-majority slots went to independents).

Of course, its possible to have appointees who represent both parties but have the same philosophical approach to regulation.  In other words, party affiliation isn’t by itself a guarantee of diverse viewpoints.

The current Commission, however, does have a diversity of viewpoints that break down along party lines.  The Commission currently has a full complement.  Schapiro, Walter and Aguilar sit in the democratic slots; Paredes and Casey occupy the republican ones.  Four of the current appointees were put on the Commission by President Bush.  President Obama has only had a single appointment so far, the chair, Schapiro…(continue reading)

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