Michael Piwowar

Ten to Watch: Michael Piwowar

A New Guard

As the changing of the guard within the U.S. Securities and Exchange Commission continues, incoming commissioner Michael Piwowar, the first economist to hold the post in seven years, is poised to play a significant role.

The Senate confirmed Piwowar, as well as Kara Stein, as the next SEC commissioners on Thursday, replacing outgoing Democrat Elisse Walter and Republican Troy A. Paredes.

There’s no question that SEC commissioners have an impact, but Piwowar’s nomination represents a wider shift in the agency’s direction.

He most recently acted as the Republican chief economist for the Senate Banking Committee under ranking member Mike Crapo, R-Idaho, and has served under both President Barack Obama and President George W. Bush on the Council of Economic Advisors. While his bipartisan background may help broker critical compromises among commissioners, it’s his role as an economist that is more notable.

Piwowar will likely take a leading role on the regulator’s economic analysis process, which has been called into question by both the courts and Congress. Within the last decade, the D.C. Circuit court overturned several commission rules in high-profile cases—most recently in a July 2011 decision in favor of the Business Roundtable and others contesting the agency’s proxy access rule. It’s slammed the SEC’s lack of adequate cost-benefit analysis, ruling the commission had a legal obligation to perform.  Republicans also have jumped on the bandwagon, proposing legislation that would force the SEC to perform comprehensive economic analysis.

Yet Piwowar is in a unique position to see that the court’s mandate is upheld and Republican concerns are addressed. “Mike’s in-depth expertise of capital markets and background as a chief economist make him exceptionally well-qualified for this position as the SEC moves forward on critical issues,” Senator Crapo says.

And while some—including the departing Walter—have argued that the additional economic analysis usually means delays, it may lead to more measured results. “Traditionally, the commission has been very focused on securities laws, and as a result, the commissioners and staff have been predominantly made up of securities lawyers,” says Cynthia Glassman, the last economist to serve as an SEC commissioner from 2002 to 2006. But economists can really help evaluate which paths within the rule-making process will be the most effective with the least burden, Glassman says.

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