Congress May Form Select Committee to Reform Financial Regulation

The idea of forming a special Congressional committee to reform the entire spectrum of financial regulation is gaining ground as the 110th Congress moves towards a close. In addition to a recent Wall Street Journal piece espousing this idea, in testimony before the House Financial Services Committee, Joel Seligman urged each house of Congress to create a Select Committee to provide a focused and less contentious review of what should be done. The co-author of the prestigious Loss-Seligman-Paredes treatise of securities regulation reasoned that the most difficult issues in discussing appropriate reform of the regulatory system become far more difficult when multiple Congressional committees with conflicting jurisdictions address overlapping issues.

In the reform that is coming, he continued, it is important that all appropriate alternatives be considered, including consolidating regulatory agencies, creating new regulatory agencies and transferring jurisdiction. This type of review is far more likely to succeed before a single Select Committee, presumably including the chairs or appropriate representatives from the existing oversight committees.

In his view, the one reason that the idea of merging the SEC and CFTC has never received serious Congressional consideration is that the SEC and the CFTC were subject to separate Congressional oversight committees. The most likely way in which there can be a mature consideration of the wisdom of consolidation of the SEC and CFTC would be to vest in a single committee in each house of Congress oversight responsibility for all stocks, stock options, and financial futures (or all futures). Similarly, the most likely way there could be mature consideration of broader types of financial regulatory consolidation today would involve vesting in a single committee in each house of Congress oversight responsibility over all relevant financial agencies.