Press Releases

Bachus Statement During SEC Oversight Hearing

WASHINGTON, July 20, 2010 -  

July 20, 2010

- Financial Services Committee Ranking Member Spencer Bachus made the following statement today during the Capital Markets Subcommittee hearing entitled, "Oversight of the U.S. Securities and Exchange Commission: Evaluating Present Reforms and Future Challenges."  In April, Ranking Member Bachus and Capital Markets Subcommittee Ranking Member Scott Garrett requested this hearing.

"In the last two years, we've witnessed the collapse of Bear Stearns, Lehman Brothers - and ultimately the Consolidated Supervised Entity program - the breaking of the buck' by the Reserve Primary Fund, the multi-billion Madoff and Stanford Ponzi schemes, as well as numerous operational and personnel problems identified by the SEC's Inspector General.  These very significant and recent failures give us all the more reason to conduct aggressive oversight and to demand that the SEC be held accountable at all levels of the agency. 

"What many of us find particularly troubling is that the majority of the SEC's problems were caused by its failure to use its existing authority to protect investors and to address frauds and other sharp practices in already heavily regulated areas of our capital markets.   

"Chairman Schapiro, I do understand that you inherited a Commission with a tarnished reputation and significant personnel problems.   You have performed admirably attempting to revitalize the Commission's culture, but clearly more fundamental improvements are necessary.  If there are legal impediments preventing you from further transforming the agency, particularly with the civil service laws, it is our hope that we can use these oversight hearings to learn what measures can be taken to manage the Commission more effectively and demand higher ethical and professional standards of its employees.

"The legislation increases the threat that the SEC will create more uncertainty in our capital markets through the exercise of new powers to reform practices which in no way contributed to the financial crisis we experienced in the past two years.  The financial crisis was not caused by securities arbitration agreements, corporate governance rules, or the broker-dealer suitability standard.  Nonetheless, the Dodd-Frank Act requires the SEC to address these perceived problems. 

"As we see with subprime lending, when everyone is in charge no one is in charge.  Shared responsibility resulted in inaction because the agencies were never able to agree on what action to take or even to recommend.  Now, the Dodd-Frank Act that the President will sign into law tomorrow gives numerous regulators vague new authority to regulate various entities.  For instance, as a result of this new legislation, clearing houses and so-called financial market utilities will be require to process vast dollar amounts of derivative products.   Will they become the next too big to fail entities?  Is there an implied government guarantee or even an explicit one that they will not be allowed to fail?   The SEC or the CFTC is the primary regulator of many of them today.   Will that continue to be the case?  The Federal Reserve in many cases appears to be the ultimate regulator or umbrella operator.  Will they be the regulator in charge if the regulators cannot agree?  And what is the role of the Financial Stability Oversight Council as it relates to the clearing houses and financial market utilities?  Will they have any independent regulatory role?   These questions and other may not be answered for years and; therefore, the uncertainty that existed before this legislation passed is, if anything, increased." 


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