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The New York Times reports that new SEC head Mary Schapiro is already shaking things up, less than a month into her tenure.In one move, she reversed a rule implemented by her predecessor that required enforcement lawyers to obtain the consent of commissioners before taking action on major cases. Also admirable is her decision to clear the way for greater investor input in corporate governance, a problem that many experts believe was a major factor in the collapse of the economy. According to the Times, "She says she will work quickly to adopt rules to minimize the conflicts of interest at credit-rating agencies that many experts say contributed to the current crisis. She is exploring whether to impose restrictions on short-selling, a type of trade in which an investor profits on stock declines. One idea she is considering is the revival of the uptick rule, a regulation that prohibited short-selling while a stock is declining."
Ah. Great. Just what we need: another SEC chief willing to devote precious resources to battling the imaginary demon of short selling that had nothing -- I repeat: nothing -- to do with the current financial crisis. Indeed, more aggressive short selling might have prevented shares of companies like Lehman Bros. and Bear Stearns from becoming so inflated in the first place.
That miscue aside, it's clear that Ms. Schapiro has been successful so far, at least from a PR standpoint. But before we get too excited, let's not forget about her dismal track record, which is a far better predictor of her effectiveness than a few weeks of tough talk.
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