Schapiro money-fund failure marks diminished role for SEC

‘More Combative’

“She’s been chairman at an extraordinarily difficult time,” said Barbara Roper, director of investor protection for the Washington-based Consumer Federation of America. “It may be that the times called for someone either with a thicker hide or more combative nature.”

In the view of some in the securities industry, Schapiro has been a balanced overseer. R. Cromwell Coulson, chief executive officer of New York-based OTC Markets Group Inc., said she did a good job dealing with events outside her control.

“She had the three C’s -- a crisis, Congress and the courts -- really boxing in her tenure,” Coulson said.

With 4,500 employees in 11 outposts across the country, the SEC is an unwieldy behemoth. Its responsibility to police the markets includes such unrelated tasks as unearthing insider trades, examining disclosures about chemicals used in natural gas fracking and writing rules for trading technologies so new that experts can’t agree how to define them. Even in smooth economic times, chairmen have struggled to tame the agency.

Cox’s Party

In the 2008 crisis, Schapiro’s predecessor, Christopher Cox, was sidelined as Federal Reserve Chairman Ben S. Bernanke and then-Treasury Secretary Henry Paulson moved to rescue the financial system.

Cox, a former Republican congressman from California, was at a birthday party the night the government pushed the sale of Bear Stearns Cos. on JPMorgan Chase & Co. Later, when Paulson proposed a new regulatory blueprint that called for eliminating the SEC, Cox didn’t express strong objections.

Cox was traveling and unavailable for comment, said a spokesman for law firm Bingham McCutchen LLP, where he works.

Schapiro grew up in Babylon, New York, the daughter of a printer and a librarian. She graduated from Franklin & Marshall College in Lancaster, Pennsylvania, before earning a law degree from George Washington University. A political independent, she worked at the Commodity Futures Trading Commission, was named an SEC commissioner by President Ronald Reagan in 1988 and returned to the CFTC as chairman under President Bill Clinton.

Creating Finra

In 1996, Schapiro joined the National Association of Securities Dealers, a brokerage-industry oversight body, and about 10 years later led its merger with the New York Stock Exchange’s regulatory unit to form the Financial Industry Regulatory Authority, a Wall Street-funded overseer of more than 4,000 firms. Finra’s board later issued a report criticizing the organization for missing signs of Madoff’s Ponzi scheme as well as R. Allen Stanford’s $7 billion fraud.

For a regulator, it was a lucrative job. Schapiro, who also served on the boards of Kraft Foods Inc. and Duke Energy Corp., received a payout of about $9 million as Finra’s CEO when she left to head the SEC.

Schapiro, the SEC’s first female chairman, was installed as Obama administration officials floated a plan to strip down the regulator’s responsibilities, or merge it into another agency.

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