SEC Commissioner Kara Stein Declares War on SEC Chair Mary Jo White by Yves Smith, June 13, 2014
A relatively new SEC Commissioner, Kara Stein, has decided to depart from the usual polite behavior regulatory overseers and is making noise about SEC decisions and policies that she finds to be dubious. The word most commonly used in the media about her remarks is “blistering”.
But the press, while giving Stein’s unusually forthright speeches the attention they warrant, has either failed to notice or is pretending to miss what is really going on: Stein is taking on SEC chairman Mary Jo White on her finance-firm-friendly regulatory stance in a remarkably frontal manner.
I am posting this diary so this brilliant and informative speech by Kara Stein on June 12, 2014 will not be missed.
Remarks Before the Peterson Institute of International Economics
it’s past time to require some meaningful minimum haircuts for all types of securities lending and repos in our net capital regime. It simply doesn’t make sense to argue that even high quality assets have zero risk. This defies lessons learned from the recent financial crisis and basic principles of finance. Yet, the current rules allow that. We need to address the stability and resiliency of our short-term funding markets comprehensively, and I hope you will join me in the effort.
... It is disturbing that members of Congress and reporters have been inquiring about the level of cooperation between the SEC and the OFR regarding a report on potential sources of systemic risk. We should all be above this. The FSOC’s mission is far too important to be bogged down in a regulatory turf war. We all share a common purpose: to make sure the foundation of our financial markets is strong so it can support a strong and thriving economy.
Although systemic risk has not traditionally been a focus of the SEC, it is now. And we need to embrace that mission and that responsibility. Without a doubt, firms and markets we regulate contribute to systemic risks in a number of ways. We need to do more on this front, and we need our fellow regulators’ help.