Barbara S. Thomas, John R. Evans, Philip A. Loomis, Jr. and Stephen J. Friedman
"This campaign suggestion would involve a letter request by Mr. Reagan to all trade associations asking them to poll their memberships on what they perceive as the ten most ill conceived or unproductive federal regulations affecting business today. This request and the responses gathered would in effect become a ‘hit list' much like the FBI's 10 Most Wanted List. The results of this survey could become Mr. Reagan's Hit List for Regulatory Reform."
- August 14, 1980 Letter from Thomas Renk to Douglas Winn, with sample letter and "Hit List for Regulatory Reform" form from Ronald Reagan
When SEC Commissioner A. A. Sommer, Jr. described the SEC and the field of securities law "in the midst of revolution" in 1974, he could not have imagined how the wheel would turn in a few short years.
Clearly, there were voices questioning the nature and methods of SEC regulation in a broad range of fields. Calls for a re-examination of the extent of market regulation came from inside and outside the SEC. Countervailing forces in Congress and the courts, push back from the New York Stock Exchange, and new arguments and theories proposed by academia, all created new challenges for the SEC, questioning whether some aspects of regulation hurt investor confidence and market stability.
President Carter has sought limited reforms by subjecting regulatory agencies to a review process. Perhaps by themselves, none of these voices would have been enough to stay the regulatory trajectory of the SEC, with its long history and strong ethos of regulatory enthusiasm, and its dedicated staff of true believers. But the rise of Ronald Reagan, and his election to the Presidency in 1980, gave new voice and political power to long-held ideas from respected theorists who had questioned whether government regulation promoted or hindered the freedom and vitality of the markets.(69)
Ronald Reagan campaigned on a variety of themes, not the least of which involved what he saw as the overbreadth and harmful influence of excessive regulation. While Reagan did not single out the SEC, in his campaign speeches he questioned whether government regulators who interceded in the market did more harm than good. For years, Reagan had been advocating that it was time to "regulate the regulators." Citing both the New Deal ideal, which he claimed "was the original idea" but which had produced "sick and arthritic industries," Reagan called for passage of legislation to create a new commission "empowered to focus its attention on six of the independent regulatory agencies" which should be chaired, he argued, "by men and women who where the laws of the mkt. place can replace the useless regulations and create real savings for consumers."(sic)(70)
During his campaign, he reemphasized his belief that the marketplace should not be unduly hampered by bureaucratic regulations and regulators holding down the vital wellspring of business innovation. Soon after his election, President Reagan issued Executive Order 12291 which established a process for review of all significant regulatory proposals and mandated the use of cost-benefit analysis for agency regulations.(71)
No one could fully anticipate that the last two decades of the 20th century would bring enormous change in both the scope and scale of the securities industry, and that innovators would develop new and exotic securities products that would challenge the intellectual and administrative capacity of the SEC to understand and control. No one fully anticipated how rapidly the securities industry would change, and how the SEC would respond to the emerging challenges resulting from that change.(72)
By 1981, the real issue was not whether the revolution was upon us. Even though he did not anticipate the Reagan phase of the revolution, in that regard SEC Commissioner Sommer was prescient. The real issue was whether the revolution in the securities industry would be the one he foretold, one where the SEC and it staff of regulators played an important role in stabilizing and promoting the securities markets, or whether the market would revolutionize the role and responsibility, and ultimately the reputation and bright image, of the SEC.
(69) Milton Friedman, Capitalism and Freedom (University of Chicago Press: Chicago, 1962). Friedman provided an intellectual foundation for Reagan's anti-regulatory philosophy.
(70) Kiron K. Skinner, et. al., Reagan In His Own Hand (Free Press: New York, 2001), 294
(71) Kenneth R. Mayer, With the Stroke of A Pen: Executive Orders and Presidential Power (Princeton University Press: Princeton, 2002)
(72) Note, however, these prescient speeches by SEC Chairman Williams: November 29, 1979 "The Securities Industry Entering the Eighties: An Economic Overview" – Address by SEC Chairman Harold M. Williams to the Securities Industry Association; and March 17, 1980 "The Challenges of the New Decade" – Address by SEC Chairman Harold M. Williams to the Providence Journal/Brown University Public Affairs Conference
(Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
