Securities and Exchange Commission Historical Society

The Mechanics of Legislation: Congress, the SEC and Financial Regulation

The Way Forward

At first glance, both ITSFEA of 1988 and the Gramm-Leach-Bliley Act of 1999 appeared to have risen out of financial scandals that led to public demands for reform. A fuller examination of the legislative history shows a distinctive process for each crisis with different consequences for successful implementation, and the ultimate success or failure of those reform efforts.

The catalyst for implementing the reforms was different, which led to a significant diversion in process. Insider trading legislation rose out of scandal that struck at the heart of public confidence in the markets; constituent disapproval played a major role in catalyzing Congressional action. On the other hand, one might describe the Gramm-Leach-Bliley Act legislative process as a long-term building of consensus, gathering allies and waiting for the right political moment to implement the strategy.

The boundaries of legislation are defined by a process that permits full debate, transparency and careful consideration. Institutional expertise among Congress and regulatory agencies provides a stable foundation for legislative change; experts understand and can assess the likely impact of changes on the financial system and interested parties. Absent that experience and missing that consideration, the investing public can only guess at the impact of the laws and regulations which affect the markets.

We cannot return to an earlier, less complicated and less contentious time. Yet the words of Bryce Harlow, Presidential counselor, speechwriter and lobbyist in Washington for over fifty years, and an acute observer of the national political process, provide some context. In a 1963 speech, Harlow commented, “Being a Congressman is a tumultuous experience, and labor never-ending. I learned that it involves a maze of issues, hundreds of influential people, thousands of little people. It calls for a gift of expression, a gregarious spirit, inexhaustible energy — and patience, patience, patience.” 42 Compounded by the inexorably increasing complexity of the world financial markets, the ability of Congress to respond to those demands remains a difficult but essential task, limited only by the ability and commitment of those whose duty calls them to accept it.

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