When Mary Schapiro arrived at the Securities and Exchange Commission in January, the agency’s morale and reputation were at rock bottom. The collapse in December 2008 of the Bernard Madoff Ponzi scheme, which the SEC had failed to detect despite years of warnings, unleashed a torrent of attacks against the commission from investors and politicians.
A few months earlier the SEC had been little more than a bystander to the debacle of Lehman Brothers Holdings, which it supervised, as the Federal Reserve Board and the Treasury allowed the firm to fail and then engineered a massive bailout of the financial system. Political interference had slowed activity in the SEC’s Division of Enforcement, the core of the agency, even as financial market turbulence created conditions ripe for investor abuse. Some critics questioned whether the agency could ever regain its relevance.
Sensing the urgency, Schapiro moved quickly to shake up the SEC. Less than two weeks after taking over as chairman, she publicly announced she was abandoning the policy of her predecessor, Christopher Cox, that had required the enforcement division to seek approval from the SEC’s five commissioners before negotiating fines with companies accused of violating securities laws. She also gave enforcement staff the power to open investigations without commissioner approval. By loosening the bureaucratic handcuffs, Schapiro hoped to give her staff a much-needed morale boost and signal a new activism at the agency.
"I wanted to do things that were visible and quick, so the ....