Sunday, November 30, 2008

Eliot Spitzer for SEC?

When John McCain said he would appoint Andrew Cuomo, the New York Attorney General noted for his aggressive investigations of Wall Street, as Chairman of the S.E.C., my thoughts immediately turned to another former New York Attorney General famous for is agressiveness toward Wall Street Eliot Spitzer. And now it appears that others have thought of that as well.

So, would Spitzer make a good choice for chairman of the SEC? Reluctantly, I must say no. Yes, Spitzer is an expert on Wall Street's dirtiest secrets. Yes, backed with the power of the federal government, he would make both an excellent enforcer of regulations, and an excellent advisor on what new regulations to enact. And yes, cleaning up our finances and putting them on a sound, long-term footing are far more important than how Spitzer wishes to get laid.

But it wasn't just the prostitutes that brought him down. Spitzer is also arrogant, authoritarian, vindictive, and prone to abuse his office to pursue personal vendettas. Given the importance of getting our financial institutions under a solid regulatory regime, even these defects might be forgiveable, but only in an office that could be kept on a right reign. Chairman of the SEC is not that office. As McCain quickly learned when he called for the Chairman of the SEC to be fired, the President cannot fire the Chairman of the SEC. The purpose of this provision is obvious; to safeguard the independence of the SEC and insure the President does not abuse it as a political tool. But that also means that the President cannot stop the Chairman of the SEC from abusing his own agency. The independence of the SEC makes it unsafe to entrust to Eliot Spitzer.

On the other hand, I would be happy to see Spitzer in some role overseeing banks so long as someone could oversee Spitzer. Let him be US Attorney for the Southern District of New York, or head of the US Attorney General white collar crimes division (if such a division exists). Either way, the Attorney General could reign him in. Or let New York Governor David Patterson appoint him to Hilary Clinton's seat in the Senate. He could serve on the Senate Banking Committee, exposing Wall Street shenanigans, but with enough colleagues to keep him from doing any serious harm. Others have proposed some sort of informal advisory role in a kitchen cabinet.

In any case, Spitzer certainly has much of value to offer in the current crisis, and he should be used. But only in a capacity that will keep him under someone else's authority.

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