As he prepared to assume office, President-Elect Reagan authorized transition team reports of independent agencies, including one of the U.S. Securities and Exchange Commission. The SEC transition team report called for the swift appointment of a Republican Chairman, and recommended eliminating unnecessary regulatory impediments to capital formation, setting as a priority the elimination of a great deal of disclosure requirements, correcting staffing imbalances, and reducing both staff and budget. The summary stated, “In virtually every area, the leadership of the various divisions is unsatisfactory either because of philosophic incompatibilities or competence…Therefore, the new Chairman should make sweeping changes in senior staff promptly.”19
Retired SEC Commissioners, fearing that implementation of the recommendations could undermine the agency, pushed back publicly. A.A. Sommer, Jr., in a letter to Counsellor to the President Edwin Meese, refuted the transition report findings, noting that “politics and ideology have been singularly lacking in Commission activity. During the time I served on the Commission, there were three Republicans and two Democrats. A person could have listened to the deliberations of the Commission for months and years and have been unable to identify the Republicans and the Democrats. This has been characteristic of the Commission from its inception in 1934 with rare, rare lapses.” Daniel McCauley lamented the shift from the SEC’s strong enforcement practices in the 1970s. “Wall Street is a cesspool of hanky-panky and the biggest gambling casino in the country; the S.E.C. has got to let the industry know that there’s a cop on the beat.”20
Critics such as Sommer and McCauley made no apologies for protecting the agency, considering the SEC a guardian of the principle that to be free, markets first needed to be fair. Among industry insiders, the battle lines of deregulation were being drawn. Debates over deregulation, simplified for public consumption, contended that big government was an impediment to business growth and productivity. Opponents of big government fought over policy, but measured success by their ability to reduce the agency’s budget and staff.
(19) December 22, 1980 SEC Transition Team Final Report
(20) January 29, 1981 Letter to Edwin Meese III, Counsellor to the President from A.A. Sommer, Jr.; Kenneth B. Noble, “The Dispute Over the S.E.C.,” The New York Times, April 21, 1982
(Courtesy of the estate of John R. Evans; made possible through a gift from Quinton F. Seamons)
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