Is the SEC Doing Enough?

Last week I wrote a blog about my concerns with the SEC, the rule changes and the repeal of the “Uptick Rule.” Since then I interviewed the current Chairman Christopher Cox who has been pretty heavily scrutinized for not doing enough. Today the SEC implemented a temporary emergency change in rules to the naked short selling rule on 19 financial institutions. Many of you watched my interview with the chairman and commented on the discrepancies in his statements. I too, noticed those same discrepancies and called on former SEC Chairman William Donaldson to help clarify some of the misconceptions. He joined me this morning on Money for Breakfast for an exclusive interview.

Donaldson was the SEC Chairman from February 2003 through June  2005 during the post Enron and WorldCom era. He was famous for creating much more transparency and for clamping down on mutual funds and regulation. During his tenure he brought about a record 1,700 enforcement cases. He did leave his post when other members of the SEC and DC felt his call for regulation, particularly on hedge funds, was too much. Perhaps now in hindsight they should have kept him in the job? His replacement was Christopher Cox who now finds himself in hot water but for different reasons.

During Donaldson’s reign the Dow climbed from 8,041 to 10,274, a gain of 2,233 points and the S&P went from 851 to 1,191, a gain of 340 points. Donaldson’s history in the financial community is rich to say the least. In addition to being the 27th SEC Chairman, he was chairman and CEO and co-founder of Donaldson, Lufkin & Jenrette, Chairman and CEO of the New York Stock Exchange, chairman and president of Aetna and worked for the government during five different presidential administrations. He was under Secretary of State to then Secretary of State Henry Kissinger and Counsel and special adviser to Vice President Nelson Rockefeller.

After our interview he did admit that this was one of the most difficult times he has seen in the financial markets. He wouldn’t say it as bluntly as I think he would like to, but he did imply that the SEC was not doing enough. Look at what he says about whether the SEC needs to rethink the repeal of the “Uptick Rule” and whether the relationship between prime brokerage business and naked short selling needs to be reviewed.