SEC's Next Top Cop Will Take Us Back to the 1990s

Paul Atkins, Donald Trump’s choice to chair the Securities and Exchange Commission, could signal the end of an era in securities regulation that began with the dot-com bust of 2000 and the scandals that followed. For the sake of investors, he would do well in returning us to the less ambitious but more constructive SEC of the 1990s.

Richard Breeden and especially Arthur Levitt, who between them chaired the SEC through the entire decade of the 1990s, are remembered for vigorous prosecution of objective fraud, such as brokers embezzling from clients or Ponzi schemes, and commonsense regulations that ended (or at least pruned back) the Wall Street old boys club full of self-dealing and conflicts of interest. Neither chair seemed interested in economic or political goals beyond cleaning up financial markets, nor in battling with courts or other regulators.

This was a popular attitude in the 1990s when everyone loved the markets. The stock market only went up, faster than at any time in history, and the occasional down moves were just buying opportunities. Financial markets were underwriting the internet and other exciting technologies that would define the early 21st century. But the technology stock crash in March 2000 and the scandals revealed by the ebbing tide soured the mood. From Harvey Pitt to Gary Gensler, 2001 to the present, SEC chairs have had more aggressive and expansionist agendas, for better or worse. After the financial crisis of 2008, the SEC further changed character, hiring more economists who gained influence over the formerly lawyer-dominated commission.