[Congressional Record (Bound Edition), Volume 155 (2009), Part 20]
[Senate]
[Pages 27667-27668]
[From the U.S. Government Publishing Office, www.gpo.gov]




         TRIBUTE TO CHAIRMAN SCHAPIRO AND COMMISSIONER AGUILAR

  Mr. KAUFMAN. Madam President, I rise today primarily to note for the 
Record two recent speeches: one by Chairman Mary Schapiro and the 
second by SEC Commissioner Luis Aguilar.
  Last year, rapid changes in the markets, opaque practices, and a lack 
of effective regulation caused a devastating financial debacle from 
which our Nation is still struggling to recover.
  The lesson was simple: when our regulators fail to keep pace with 
market developments and are taken off the field, the consequences can 
be disastrous.
  With this lesson in mind, I wrote to Chairman Mary Schapiro on August 
21 urging the Securities and Exchange Commission to undergo a 
comprehensive ``ground up'' review of a broad range of market structure 
issues in order to ensure our regulatory capacity is up to speed with 
changes in the market.
  I am pleased that the SEC is in the process of conducting such a 
review and has already acted to address flash orders and dark pools, 
two sources of potential unfairness that are opaque and insufficiently 
regulated. But a few narrowly tailored rule proposals are not enough to 
restore investor confidence and avert a future disaster. We need 
regulators, lawmakers, and investors to embrace a new approach to 
regulation--one that values fairness and transparency over liquidity 
and nips systemic risks in the bud.
  Accordingly, I applaud Chairman Schapiro's speech, entitled ``The 
Road to Investor Confidence,'' which she delivered at the Securities 
Industry and Financial Markets Association annual conference on October 
27.
  Chairman Schapiro outlined the road towards a lasting regulatory 
framework and a fairer market, asserting:

       To me, we don't get there by assuming all is well now, and 
     reverting to the practices that got us to where we are. We 
     don't get there by letting newly engineered financial 
     instruments escape the umbrella of regulation and the natural 
     disinfectant of meaningful market transparency. And, we 
     certainly don't get there by permitting, or even advocating, 
     for gaps in our regulatory landscape. I believe those are the 
     directions that send us back to another financial crisis. 
     And, we cannot afford to let that happen.

  Chairman Schapiro also discussed the importance of adopting a 
forward-looking approach to regulation, particularly with respect to 
rapid technological developments like high frequency trading.
  She said:

       I believe we need a deeper understanding of the strategies 
     and activities of high frequency traders and the potential 
     impact on our markets and investors of so many transactions 
     occurring so quickly.

  Following the chairman's lead, Commissioner Aguilar also struck a 
thoughtful chord with respect to upcoming regulatory reform in an 
impressive speech delivered at George Washington University Law School 
last Friday.
  Commissioner Aguilar underscored the need for meaningful reform, 
stating:

       [T]here is a growing concern that we might miss the 
     opportunity to make the transformational changes required to 
     address the realities of today's financial markets--and to 
     prepare for the unforeseen challenges of tomorrow. Moreover, 
     I fear that we may go down the path of piecemeal changes that 
     give the illusion of regulatory reform but leave us in danger 
     of repeating our recent history. This ``false comfort'' would 
     be a recipe for disaster.

  Commissioner Aguilar also highlighted specific recommendations that 
should guide financial reform efforts. He asserted the focus of 
systemic risk regulation should be on investor protection and, should 
ensure ``the continuation of systemically important market functions, 
not institutions. . . . To that end, systemic risk regulation should 
facilitate an environment where no institution is indispensable and 
where other firms can step in to meet the needs of the market.''

[[Page 27668]]

  Commissioner Aguilar went on to endorse the creation of a council of 
regulators which would better ``identify accumulation of risks . . . 
[provide] for a diversity of perspectives that could make it more 
likely that a risk will be identified . . . facilitate the free flow of 
information among regulators . . . [and] avoid the inherent tensions 
and conflicts that arise when one regulator has combined 
responsibilities over monetary policy, a vested interest in the safety 
and soundness of particular institutions, and plenary powers to address 
systemic risk.''
  In addition to laying the foundation for systemic risk regulation, 
Commissioner Aguilar also maintained that regulators must be empowered 
to address a broad range of market practices, like hedge funds and 
asset-backed securities, for example, in order to ``not only close 
today's gaps but to look ahead and [use] flexible powers that can be 
deployed as an unknown future unfolds.''
  Undoubtedly, reform is long overdue, and so I am pleased this body 
appears set to undertake financial regulatory reform legislation in the 
coming months. I look forward to working with my colleagues to enact 
meaningful reforms.
  With Chairman Schapiro and Commissioner Aguilar's words as a guide, 
Congress should grant regulators the authority to ensure our markets 
are fair, stable and transparent in order to prevent another disaster. 
Mr. President, failure to do so is simply not an option.
  Madam President, Chairman Schapiro and Commissioner Aguilar's 
speeches may be found at: http://www.sec.gov/news/speech/2009/
spch102709mls.htm (Schapiro) http://www.sec.gov/news/speech/2009/
spch110609laa.htm (Aguilar).

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