Yesterday, SEC Commissioner Dan Gallagher gave what he said was likely to be his last formal speech as an SEC commissioner. Although Gallagher's five-year term as commissioner does not officially end until June 2016, he notified the White House in May 2015 that he intends to depart the SEC as soon as his successor is confirmed by the Senate.
In his speech, which was delivered before an audience at the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness, Gallagher took aim at a favorite target of his through the years: the Dodd-Frank Act. Gallagher noted that Dodd-Frank marked its fifth anniversary last month,
meaning that my entire tenure as a Commissioner has occurred in the midst of the first Five-Year Plan for our national economy. And, as is always the case with grandiose central plans, Dodd-Frank has backfired, strangling our economy, increasing the fragility of the financial system, and politicizing our independent financial regulators.
Gallagher's frustration with Dodd-Frank is nothing new. In July 2014, Commissioner Gallagher called the rulemaking responsibilities placed on the SEC by Dodd-Frank an “unfettered distraction” that was leading the agency on a “death march.” In a October 2014 speech, Gallagher said that "Dodd-Frankenstein,” as he dubbed it, still had the Commission "at a precipice, teetering on the edge of irrelevancy as we devote a wildly disproportionate amount of resources to implementing" the law's agenda. Rather than "focusing on policy issues that are core to our mission," he stated, "the Commission has spent much, if not most, of its time and resources for nearly half a decade shoveling manure, in some cases for no discernable purpose whatsoever."
In yesterday's speech, Gallagher asserted that Dodd-Frank's jurisdictional grants of authority to bank regulators, i.e., “prudential regulation,” occurred because Congress accepted
a narrative contrived in large part by those very same regulators. The narrative held that, unlike clunky capital markets regulators like the SEC, prudential regulators were good enough and smart enough to run our economy — and doggone it, the 111th Congress liked it!
Gallagher added that prudential regulation's goal of "de-risking" U.S. capital markets to make them look like banking markets is "not just philosophically wrong — they are an attack on U.S. competitiveness." He expressed his support and agreement for the position taken by IOSCO Chairman Greg Medcraft, who recently opined that the asset management industry does not pose a systemic risk and that“markets are all about taking risks and should be regulated in different ways to banks.”