Reply #59: SEC to Come Under Scrutiny (of Senate) [View All]

[UpInArms]

http://online.wsj.com/article/SB121004548182970067.html

WASHINGTON -- The Securities and Exchange Commission's oversight of investment banks will come under scrutiny at a Senate hearing Wednesday, setting the stage for a debate about changes to regulation of financial markets and securities firms.

The collapse of Bear Stearns & Cos. and subsequent temporary opening of the Federal Reserve's lending window to securities firms has raised questions as to whether the Fed should have greater oversight of investment banks. The Treasury Department has published recommendations that would give more oversight authority to the Fed while potentially reducing the SEC's role.

"Before you can go ahead and start proposing new arrangements you have to understand the strengths and shortcomings of the current arrangement. That's at the heart of what we're trying to do," said Rhode Island Sen. Jack Reed, chairman of a subcommittee of the Senate Banking Committee, which is holding the hearing on SEC oversight.

The SEC has maintained that its oversight was adequate by ensuring that no investor funds were misused amid the turmoil at Bear Stearns.

It is also investigating potential manipulation of Bear Stearns and Lehman Brothers Holdings Inc. stock, according to people familiar with the matter. SEC Chairman Christopher Cox told members of Congress in recent weeks that he will support making the SEC's currently voluntary top-down oversight official by writing it into law.

Separately, Republican SEC Commissioner Paul Atkins announced Monday that he won't seek nomination for another term but will stay on until a successor arrives. Two nominees for vacant Democratic commissioner slots are awaiting confirmation hearings.

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