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Mary Schapiro Discusses The Changing Market Landscape, Questions Just What Her Job Really Is
From Mary Schapiro's speech at the 37th Annual Securities Regulation Institute at the Hotel del Coronado, California, surely a very much deserved, and taxpayer sponsored boondoggle, on the changing landscape in financial markets. Presented without expletive filled commentary.
Indeed, today's financial landscape is quite different. It is filled with uncertainty - where new products are conjured up every day, not fully understood and nonetheless sold with lightening speed and extraordinary, sometimes devastating, consequences.
So, the key for all of us - regulators, corporate boards, securities professionals, accountants and attorneys - is to understand this new landscape, respond with vigor and adjust accordingly.
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Keeping Integrity in the Markets
Another series of changes that I believe are needed and that we are making involve the structure and functioning of our markets. The fact is that markets and market regulation should promote investor confidence, not undermine it. Such confidence is essential to the efficient flow of capital and the long-term success of financial markets and the economy.
But since the financial crisis began, there has been some unease that markets are being stacked against typical retail investors. The roots of any deficiencies in market structure must be addressed head on to ensure that markets are transparent and investors are treated fairly.
That is why the SEC is taking - and will continue to take - a fresh look at market structure and trading activities. We must continually seek to ensure that we are fostering fair, orderly, and efficient markets that are designed to protect investors.
And, where there are areas of concern that warrant attention, the SEC will take action.
Already we have proposed rules that would effectively prohibit broker-dealers from providing customers with "unfiltered" access to an exchange or alternative trading system. We have proposed rules that would strengthen our regulation of dark pools of liquidity.
And we have proposed banning the practice of flashing marketable orders - a practice that provides a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes.
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Reducing Reliance on Credit Rating Agencies
Another area where change is needed involves the over-reliance on credit rating agencies.
It is a change that is long overdue.
As many of you know, one significant cause of the crisis was the securitization of sub-prime mortgages, the resulting weaker underwriting standards by loan originators and the systemic risk that cascaded through the markets.
Although few understood the risks associated with these complicated financial instruments, many investors and even regulators over-relied on credit rating firms. They viewed their high ratings as indicia of good quality and low risk.
But those ratings were faulty and the consequences severe.
In response, the Commission has undertaken a series of rulemakings designed to strengthen our oversight of these agencies, enhance disclosure and improve the quality of ratings.
We would do this by:
* Requiring these firms to disclose a history of their ratings activity.
* Fostering competition by ensuring all agencies have access to similar information.
* Providing more information on where these firms are generating their revenue.
* Requiring issuers to disclose what the rating covers, who paid for it, and any limitations on the scope of the ratings.
* Shedding light on rating shopping by revealing whether any other preliminary ratings had been obtained.
Finally, we have begun the process of removing references to ratings in several of our rules and regulatory forms - a surprisingly difficult process.
The idea is to give investors a better sense of the track record of the credit rating agency, a better sense of what the rating means, and a better sense of how much weight the rating should be given.
Asset-Backed Securities: But our push for increased transparency and regulation doesn't stop there. At the SEC, we are reviewing our regulation of the asset-backed securities market - from disclosures to offering process to the reporting of asset-backed issuers.
And, as we speak, the staff is working on proposals that would align the interests of those selling these products with those investing in them.
Among other things, I envision proposals that would seek to:
* Provide significantly more time for investors to conduct a careful analysis before investing.
* Require that loan level data is provided in a format and manner that is accessible by investors.
* Revise the eligibility standards for "shelf" offerings and eliminate the use of credit ratings as an eligibility standard for shelf.
* Create a mechanism for ongoing disclosure. The proposals are being designed to be forward-looking - to improve areas that may not yet have caused serious problems, but have the potential to raise issues similar to the ones highlighted in the financial crisis.
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In the future, we will be tackling issues involving the municipal securities markets, the relationship between retail clients and their brokers and advisers, the mechanics of proxy voting and the role of advisory firms. And so much more.
If there's one thing the recent financial crisis taught us it's that the status quo is clearly not good enough. Not for our markets. Not for investors. And, not for our economy.
To succeed, we all need to embrace the change - change that is needed to improve our regulatory system, better protect investors and restore confidence in the markets.
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To say she is a waste of skin would be an understatement. Keep Proposing Mary - just as long as Nothing Ever Actually Gets Done.
She may be the living embodiment of the Peter Principal, but don't be so hard on Mary. I'm sure her job performance is EXACTLY what her superiors (read banksters) expect from her. Honestly, if she was really doing what she should be doing, she would have been replaced a long time ago.
Good point.
if mary schapiro really knew what her job was she would have resigned in disgrace last year....but she really really really knows what her job is and that is to carry water for rockefeller appointed indonesian president soetoro....
%^$*^&%*&#!
So her main focus is to restructure the SEC rather than investigate things she doesn't understand?
Yea, every company I ever worked for restructured when they figured out they were all fucked up. Didn't fix anything, but sounded good.
This tells me the PTB are still trying to figure out a way to get suckers to buy debt backed securities. The FED must be running out of ways to continually manipulate these markets as to try to get others buying consumer debt that will never be repaid.
When will they figure out that the suckers will not come back for a second helping of vomit (as they were refered to by infestment banks while selling them)?.
Hey Mary please call Lloyd...he needs another favor....
What Wall Street Really Fears
The hearings into the roots of the recession aren’t scaring Wall Street. What’s really frightening is public anger at the industry shows no signs of abating, and Lloyd Blankfein, the man leading the charge to turn that around, is only making matters worse—and possibly putting his job at risk.
The least appealing CEO on Wall Street is leading the effort to change the public perception that the system is rigged against the little guy suffering through 10 percent unemployment while the big banks party on.
If the hearings proved one thing, it’s just how much of a liability Goldman and Blankfein are to Wall Street’s attempt to massage its rotten image as an organization that feasts off government subsidies while Main Street suffers. Goldman is making bundles of money, which will make its shareholders happy. But it’s also emerged as a lightning rod because of its obvious manifold ties to government (former Treasury Secretary Hank Paulson, also a former Goldman CEO, gave his old firm $10 billion during the height of the meltdown, but let Lehman Brothers fry) and because Blankfein has spent most of the past six months on a high-profile charm offensive, clumsily trying to explain how his firm deserves to hand out the $20 billion in bonus money it accumulated since the 2008 bailout.
But when pressed, Blankfein conceded that the same firm that hoarded all this cash, that had all these hedges and guarantees to protect itself from AIG failing, didn’t think twice about taking its full share of the money AIG owed it—100 cents on the dollar—once Paulson & Co. decided to bail out the insurer on the U.S. taxpayer’s dime.
http://www.thedailybeast.com/blogs-and-stories/2010-01-18/what-wall-stre...
Is this serious?
She knows exactly what her job description is: swallowing as much splooge as the banks and the Fed can pump her way. And its a bunch.
That was quite a fluff piece from the Streets favorite fluffer.
The SEC condones naked short selling --- selling a stock with having to borrow it first ----
http://www.deepcapture.com/tag/the-madoff-exception/
"the madoff exception"Tags: Bernard L. Madoff, Bernard Madoff, Charles Gasparino, CNBC, Mafia, market maker, naked short selling, reg sho, Russian, the madoff exception, the madoff exemption Bernard Madoff, the Mafia, and Naked Short Selling Posted on 19 January 2009
But it wasn’t just pierogies and pistol-packing wiseguys in purple suits. Mr. Madoff was also a dedicated public servant, volunteering countless hours at the Securities and Exchange Commission.
Indeed, Madoff seems to have helped write some of the SEC’s rules. For example, Madoff had a good deal of input an SEC rule that exempted market makers (i.e. Madoff) from various regulations governing short sellers (i.e. Madoff’s friends).
Madoff’s rule ensured that market makers (Madoff) could, among other things, engage in so-called “naked short selling.” To sell “naked” is to sell stock that one does not actually possess. That is “phantom stock,” according to the SEC Chairman and many others.
Sometimes, short sellers (who profit when shares lose value) offload massive amounts of phantom stock to drive down prices, destroy pubic companies, or even crash the market. That is why there used to be restrictions.
Madoff also obtained an exemption allowing market makers to sell short on a down tick, which made it easier for unscrupulous hedge funds to drive down stock prices.
At any rate, I don’t think Madoff had an office at the SEC. He certainly was not employed there. But the SEC was glad to have Madoff write a rule exempting Madoff from the rules. The SEC was so thankful that it named one of its rules after the great man himself.
The rule allowing market markers to sell on the downtick was called, “The Madoff Exception.”
After Madoff helped writet the rule, market makers (e.g., Madoff) proceeded to “rent” their exemptions to hedge funds (i.e. friends-of-Madoff).
It remained against the law for hedge funds to sell phantom stock to manipulate the markets. It was also against the law for market makers to help hedge funds orchestrate such schemes. But under the Madoff regulatory regime, unscrupulous short sellers (i.e. friends-of-Madoff) could engage in this illegal activity so long as they did so with the illegal connivance of a law-breaking market maker (i.e. Madoff).
A few months ago, this naked short selling was implicated–by numerous academics, the U.S. Chamber of Chamber of Commerce, the Secretary of the Treasury, the CEOs of Wall Street’s biggest banks, respected law firms, John McCain, Hillary Clinton, and numerous congressmen – in the near total collapse of the American financial system.
The SEC has not prosecuted anybody for this. After all, there is an “exception.”
It is unclear whether the SEC will continue to name this “exception” after a man who might have absconded with 50 billion dollars (a sum that exceeds the gross domestic product of Pakistan) in league with the Russian Mob, an organization that is said to be in the market for a nuclear bomb – in addition to narcotics, sex slaves and, yes, phantom stock.
In any case, the major news organizations seem to have lost interest.
Wonder why they lost interest in the story.
Now restricted to "taking a fresh look" , Mary Mary not contrary the compliant regulator goes "its hard to keep up with new stuff" - a veiled whine not a growl; she continues to touch only the surface of areas and continues pretending to do something about areas such as dark pools and high speed automated trading instead of outright banning them. Pretending there will be changes when she catches up forestalling actions that won't be taken into a hypothetical future.
I am underwhelmed.
Futher compounding her disigenuous approach she is now begging the question of her competence in understanding markets claiming that rapid innovation makes it key regulators try to understand and keep up with developments. This stated goal poses an excuse for not understanding while it is a tacit admission she can't keep up with so called "new" products and ignores or misses the fact that if she understood the purpose and regulation of markets as they are and were meant to be before anything 'new' was invented, she could easily and clearly discern what should be allowed, what should not be allowed, what is fair or not fair, what its a monopolistic technical advantage. Mary you would understand what your job is as regulator
the job title. Buy a dictionary for starters, read reflect if you can.
Taking a "fresh look" happens in TV commercails for detergents or when a project gets so jumbled one has to step back and decide
where to start again, in either case a first look was taken before the fresh look. Mary has no idea what she is doing or regulating or even what regulating is and perhaps should retake her series 7 if she ever has, to have that first look she so desperately needs. But that would be a waste as she is simply the clueless slave of electronic trading houses and the dark market makers ruining the very markets they exploit at the cost of destruction of the foundation capitalism reasonably fair markets. Sadly, competence is at issue before one can consider motive intent.
Clueless can take as many fresh looks as it wants only to remain still clueless.The SEC apparently is a hollow shell now, all appearance no substance "The Stupid Exploited Compliancy." This should be no surprise in our moronic politically correct times where basic foundations of understanding need not exist or be referred to and history or any fact gets rewritten in the name of bullshit. But the state of the markets, the regulators, the society is a shameful disgrace as is any collapse of a regime, empire or a way of life.
Mary, thanks for your help.
Mary Shapiro,
You can't "keep integrity" in markets that don't have integrity in the first place. Apparently having not integrity yourself you can't understand this.
Have a nice day.
For her knowingly crim abetting activities the past 10 yrs, she should be behind bars.
Mary Shapiro,
You yourself are an "area of concern" will this be part of the "fresh look?"
"Areas of concern" really understates what are really areas of debacle or fiasco with regard to the very legitimacy of our stock market which formerly was a good example to the world and is turning out to be an excellent example of serious flaws in capitalism when regulators become the stooges of those they regulate.
Mary you will be in the history books. Not a star shining as brightly as Nero but in a similar light in a footnote.
Mary nice of you to come out to play but there was actual work involved and some substantive knowledge and integrity so you bcome a fail for your trouble to join the game.
Mary Shapiro,
You yourself are an "area of concern" will this be part of the "fresh look?"
"Areas of concern" really understates what are really areas of debacle or fiasco with regard to the very legitimacy of our stock market which formerly was a good example to the world and is turning out to be an excellent example of serious flaws in capitalism when regulators become the stooges of those they regulate.
Mary you will be in the history books. Not a star shining as brightly as Nero but in a similar light in a footnote.
Mary nice of you to come out to play but there was actual work involved and some substantive knowledge and integrity so you bcome a fail for your trouble to join the game.
Agree with other ZH'ers, Mary is doing EXACTLY what Wall Street and other want her to do. Just like oBOMBa, talk and talk yet do nothing. Corruption is now widespread and there is no real law. Trade accordingly or be honest and get out now while the HFT computers allow and your 401k is still fully under your control.
BANK RUN NOW!
and buy gold and silver.
Did she actually get paid by the taxpayers to fly out to Cali -- to that resort, to give that speech?
This statement is so dumb “And we have proposed banning the practice of flashing marketable orders - a practice that provides a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes.”
This is almost like trying to pull a splinter from the finger when you have a huge log stuck in your eye. If she is so concerned about the insider trading, how about making sure that Jamie Dimon of JP Morgan does not sit on the New York FED board of directors. I wish I can have an access to such a tremendous supply of priviliged insider information.
I can just see Jamie Dimon coming out of the NY FED meeting and telling his trading henchmen:” Hey dudes … this is hot .. just came out of the NY FED meeting …. Start loading up on this or that before the sheeple is notified though official disclosure channels”. What a scam …
This statement is so dumb “And we have proposed banning the practice of flashing marketable orders - a practice that provides a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes.”
This is almost like trying to pull a splinter from the finger when you have a huge log stuck in your eye. If she is so concerned about the insider trading, how about making sure that Jamie Dimon of JP Morgan does not sit on the New York FED board of directors. I wish I can have an access to such a tremendous supply of priviliged insider information.
I can just see Jamie Dimon coming out of the NY FED meeting and telling his trading henchmen:” Hey dudes … this is hot .. just came out of the NY FED meeting …. Start loading up on this or that before the sheeple is notified though official disclosure channels”. What a scam …
You're right, even as a stooge she is a fail. She is so lame she is transparent. A good stooge keeps the critics at bay instead of giving them more fuel for criticism.
Is there a way to fix any of this? Or do we just let an onanistic market
jerk itself and the country to death?
You're right, even as a stooge she is a fail. She is so lame she is transparent. A good stooge keeps the critics at bay instead of giving them more fuel for criticism.
Is there a way to fix any of this? Or do we just let an onanistic market
jerk itself and the country to death?
Still, as we move to the farm with a shotgun, after buying gold, gasoline, canned food and storing water, there are constructive actions that could be undertake to move history on a bit faster.
Given the markets, SEC, Congress as stooges, inflation obsession ideology etc etc have caused widespread failure in the economy and it is in the process of collapse (which is a quite reasonable "given" -more so than ever before) then we could help speed things along to the inevitable collapse rather than trying to mend what is broken, which will break again anyway, instead demolish the old failed mess so we can get on with building anew.
As has been suggested elsewhere, organized runs on the too BIG to FAILS would speed their demise and break-up. And those who have investments directly or indirectly in the stock market could simply cash out. We would also find out if anyone is in besides Goldman and the FED once and for all.(fringe benefit)
Risky, yes of course. But perhaps its less risky to take the initiative
forcing the collapse now, than waiting or allowing the powers that be to prepare their advantage for the collapse that will happen anyway.
Clearly all of America has given up on the possibility of reforming our corrupt institutions which lack of interest shows itself as apparent complacency. I am not so sure, when push comes to shove and society crumbles and these powers exert coercive control, apparent complacency won't give way to rather more active revolt and vengeance.
Why not push first? Lets take the "consumer" explicitly out of the game a take a look at the bankers and politicians with their pants around their ankles before we exile them to France.
It Truly is quite remarkable on so many levels. She, along with so many other “Regulatory Authorities” are so utterly incompetent it is astonishing. She is “Proposing” a ban on Flash trading, and “Looking Into” proposing more regulatory authority on dark pools. Hey Mary – when we were in full meltdown mode – how was it that within like 48 hours you were able to implement restrictions on the short sale of financial stocks? Let me make a suggestion – if you want the freaking flash orders to stop – haul your fat ass over to the NYSE and unplug the freaking servers that make it possible. As for dark pools – seems pretty simple – simple ban all transactions that originate within the dark pools. The truth is ALL of these issues could be “Dealt With” within a matter of hours IF the real desire were there to do so. For God’s Sake man – quit trying to Bullshit Us – either get off your ass and do something about these practices or shut the fuck up!! Better yet – resign you position and get someone in there that actually understands the problems and has the balls to do something about it.
Mary, your department has failed miserably on so many levels, and your fines and investigations...too little too late. Hiring newbies to scope out the joint at this point, could be fruitless. May I suggest hiring Egan-Jones to evaluate the true risk of any situation and also educate you on the practices within our corrupt markets, as I'm sure they've seen it all. And did I really have to suggest that?
(So why should we care which rating agency they use, if you obtain your own outside independent analysis). The buzzer has sounded and we're all out of patience and time to hear anymore BS from you. (Unless, of course, we are all invited to the Coronado to hear your resignation speech and apology to the american people and to the too small to care banks that have somehow managed to stay around, but not much longer, all expenses paid taxpayor vacation...while there's still time for a party we can believe in).
And as far as that hotel, kindof reminds me of the Biltmore in Clearwater, but not really, as that place is falling apart.
“And we have proposed banning the practice of flashing marketable orders - a practice that provides a momentary head-start in the trading arena that can produce inequities in the markets and create disincentives to display quotes.”
So it follows HFT should be banned since it has aspects similar to flash trading and also produces inequities in the markets at times risklessly profiting high frequency trader at the expense of the rest of the market that has taken on actual risk.
If follows that dark markets, should be banned since they obscure the transparency of the market at large and hide risk being undertaken
from the rest of the market who has to trade exposing their risk
in the "light" markets.
Also besides being tired of the BS and asking for her head on a plate and wishing for someone competent and with the ability to get things done at the SEC in lieu of Mary Shapiro, her latest salvo also illustrates it would be good if her replacement didn't have the imagination and analytic skills of a rock.
It is hard to blame Mary for the "naked short" neglect. If it exists, it is offshore. It was Cox (and his predecessors) that let that go on for for so long.
schapiro should be booted. Enough time has passed and she has been bot and enslaved by her inside club of connections. She had a reputation going in on being soft and ineffective at real reform. She thinks reform is symbolic investigations. No clue. Boot her. Boot them all. Here'd all the proof you need: she couldn't get a little simple thing like an uncorrupted reinstatement of the original uptick rule, amended to a bigger spread on her watch. It's caught inside her dumb comment periods that she uses to allow the manipulators to pollute any proposals away. Cmon people: the uptick. We lost firms, people became destitute, the world melted and she can't get the original (not watered down ) uptick back?? Boot her. Boot them all. When Madoff referred to Mary Schapiro as "his dear friend" what else does anyone need to know...
Mary Schapiro says that the SEC is "looking", "taking a fresh look", "proposing", "undertaking a series of rulemakings", "begun the process of", "reviewing our regulation", "the staff is working on proposals", "envisioning proposals", and "In the future, we will be tackling issues". Mary "fiddling while Rome burns" Schapiro is a complete and utter disgrace.
She sounds really responsive like one of those sexy little porsches. But she drives like a bus with flat tires and no rack and pinion steering. It's kindof of like her job is to keep things the same but pretend to change.
Mary Schapiro... a classic Obam-ination from the home of the economic stooges at the House of Dildos formally known as the White House.
Nowhere on planet earth can you find more plastic penis per square inch than a meeting of Obama's economic advisers...
Obama had better clean house or he's going to be a lame duck in the not too distant future. He needs to replace Geitner and Schapiro before the end of winter. Replacing Bernanke would be a good thing too, although I'm not sure if he has to power to do so.