What Mary Schapiro Left Out

Mary Schapiro, President Obama's bad choice for SEC chairman, testified before the House Financial Services committee today, deploying all the usual platitudes and increasingly resembling a kind of Chris Cox Jr.

Not a word about issuer retaliation, and an obligatory sop to short-haters. According to her prepared testimony:

The SEC adopted a package of measures designed to strengthen investor protections against naked short selling, including rules requiring that "fails" from short-sales be closed out in a significantly shorter time; eliminating the options market maker-exception of Regulation SHO; and expressly targeting fraud in short-selling transactions. As we move forward, the Commission will consider other steps necessary to eliminate manipulative and illegal activity in our markets, as well as limit market volatility.

What Schapiro left out of her testimony is that fails to deliver, both the mythical practice of naked shorting combined with fails caused by the zillions of other reasons -- such as deliberate nondelivery by scammers -- has dropped to negligible levels.

Daily Reg SHO threshold list data, posted on stock exchange websites, show that stocks with persistent fails on Nasdaq and the NYSE are down to just a handful of barrel scrapings. Just two stocks are on the NYSE threshold list, one of which is General Motors. Now, there's a "victim of naked shorting" if I've ever seen one.

But instead of pronouncing the death of an issue that never existed in the first place, Schapiro mouths the usual platitudes about this and other issues, while pleading for more money for her inept staff of bureaucratic do-nothings. If she's shown any sign of breaking from the discredited past of the Bush administration, it sure isn't obvious.

by Gary Weiss

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