"If anyone can force a merger of the S.E.C. and the C.F.T.C., she can."

Floyd Norris on the NY Times asks a question on many people's mind:

"Can She Save the S.E.C.?

Mary Schapiro, a veteran and diligent regulator if ever there was one, is reported to be Barack Obama’s choice to head the Securities and Exchange Commission. It is a choice that should please those who hope the S.E.C. can recover from what must be the worst year in its history ( IT MIGHT BE ONE OF THE WORST IN THE HISTORY OF REGULATORS ).

Ms. Schapiro has been around Wall Street regulation for decades. She worked at the Commodities Futures Trading Commission as a staff member in the early 1980s, then became a member of the S.E.C. and chairwoman of the C.F.T.C. She helped clean up Nasdaq and now runs Finra, the industry self-regulator. She has been appointed to jobs by Republicans and Democrats.

She will have to take a leading role in shaping the new regulatory system to replace the one that failed so badly. The bank regulators also have much to answer for, and it was the Federal Reserve that championed doing nothing about the shadow financial system that has now brought down the economy. But somehow the Fed has emerged as likely to take control of the regulatory apparatus when it is redone, while the S.E.C. has lost clout and reputation.

She showed herself a skilled infighter when the regulatory operations of the N.A.S.D. and the New York Stock Exchange were merged into Finra, a deal designed in part to reduce overlapping rules that raised costs for Wall Street. She emerged on top of the combined organization.

Chris Cox, the outgoing chairman, leaves behind a demoralized agency. Its regulation — or lack thereof — of Bear Stearns and Lehman Brothers became a subject of scorn. Now its failure to catch on to what Bernard Madoff was up to is condemned by Mr. Cox even before the investigation gets going, further damaging morale.

“I can recall nothing that rivals this in the history of the S.E.C. in terms of condemnation for how the staff had handled an investigation,” Jim Cox, a securities law professor and longtime S.E.C. watcher at Duke University, told Bloomberg News yesterday. (The two Coxes are not related.)

You may recall that relatively early in his tenure, Chris Cox did something similar after news organizations reacted with outrage to S.E.C. subpoenas of journalists. I assume he wants to send an image of an S.E.C. that is not afraid to admit its mistakes, but internally it came across as unprecedented for a chairman to rebuke the staff so publicly.

During his tenure, he moved to make it harder for the staff to file charges against companies, and the commission delayed settlements while commissioners negotiated to impose smaller penalties than the companies had agreed to pay( HE'S A DISASTER. PLEASE STOP CALLING HIM A LIBERTARIAN. THE BRAND WON'T RECOVER ).

She will have to decide whether to try to slow down the adoption of international accounting standards in this country, something Mr. Cox seems to want to make a fait accompli before he leaves.

With politicians and bankers pushing the S.E.C. to let banks fudge the numbers on their asset values by claiming they are worth more than any bank is willing to pay for them ( I KNOW SMART PEOPLE LIKE THIS, BUT IT CAN'T BE THE ONLY ACCOUNTING METHOD USED. I WOULDN"T MIND A DUAL SYSTEM ), she may have to decide whether to fight or cave.

If anyone can force a merger of the S.E.C. and the C.F.T.C., she can( RATIONALIZATION. I'VE SAID THAT IT IS ESSENTIAL FOR THESE REGULATIONS TO WORK IN PRACTICE. NO MORE SHOPPING FOR REGULATORS ). Only the futures industry lobbyists, who like the C.F.T.C.’s gentle non-regulation, and the House and Senate Agriculture Committees, who love getting Wall Street money, think it makes any sense to have one regulator for trading in stocks, and another one for trading in stock index futures ( I AGREE ). Everyone assumes the futures industry is too strong to allow such a merger to happen, especially with a president from Chicago. If she could persuade Mr. Obama to push strongly for such a merger, it would be a real sign that he is a serious reformer ( I AGREE ).

In picking Ms. Schapiro, Mr. Obama has chosen someone who knows all the issues and all the players and who is committed to effective and rational regulation."

The main function of the SEC, and it will accomplish this only if it does its job well, is to assure average citizens that the system isn't rigged in favor of the wealthy and powerful. That is, any more than it already is in its natural functioning. Otherwise, Jim Grant's call for the SEC's abolition, since it gives a false sense of security to investors, makes sense. Sometimes, poor regulation is worse than no regulation. The signs go from "Buyer Beware" to "Buyer Guaranteed".

I wish her luck, for all of our sakes.