Experts on the Future of the SEC, Part 4

3. Get in the cellar! there’s a Congressional storm brewing.

All the respondents expect some kind credit crisis-related Congressional ado. “No doubt there will be legislative reaction,” says Professor Hazen, while Professor Bromberg foresees that “the next Congress will decide whether SEC survives.”

Reform proposals abound. SEC Chairman Cox, as well as the aforementioned Treasury Department blueprint, has proposed merging the SEC with the agency responsible for regulating derivatives trading, the Commodity Futures Trading Commission. Meanwhile, powerful Congressional Democrats have been publicly discussing the creation of U.K.-like super regulator. Barney Frank, in the Wall Street Journal indicated that he favors creation of a "systemic-risk regulator," with responsibility for protecting the soundness of the whole financial system. The American Banker reports that Charles Schumer favors consolidating regulation under a single agency. (American Banker, 11/11/08, 2008 WL 21485826)

Even in this overwrought atmosphere, most of the respondents expect the SEC and disclosure-based regulation to survive. Professor Hazen says: “I seriously doubt that it will be the demise of the disclosure-based regulatory approach. […] The current crisis has exposed some regulatory gaps that will probably be addressed in the coming year.”

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