PEOPLE : Choice for SEC Chief Sails Through Hearing

Richard C. Breeden, President Bush’s choice to head the Securities and Exchange Commission, said at his confirmation hearing Thursday that he would vigorously enforce existing regulations because they are vital to preserving investor confidence.

Greeted with wary cordiality by regulation-hungry Democrats on the Senate Banking, Housing and Urban Affairs Committee, Breeden hinted that he would seek a vigorous SEC role in creating and updating regulatory policy. He enthusiastically backed suggestions that SEC staff salaries be increased to retain staff veterans.

At the same time, Breeden carefully avoided telling committee Democrats anything that he knew they did not want to hear. Although he is an ardent free-market advocate, he carefully promised “free and open debate” on proposals for increased regulation of future takeovers and high-debt corporate buyouts if he is confirmed as the top federal overseer of the nation’s securities trading.

Earlier this year, Breeden worked closely with the committee as the White House point man in hammering out the complex savings and loan bailout package. When the 39-year-old Breeden, a Manhattan Beach native, was nominated last month, committee Chairman Donald W. Riegle Jr. (D-Mich.) had questioned his ability, saying that Breeden “brings a limited direct market experience to this critical assignment and that is a matter of some concern when the SEC faces a time of epic challenge.”

Was Well Prepared

Some observers expected Breeden to face tough questioning about his experience, but little of that distrust surfaced Thursday.

Known as a quick study, Breeden had made the rounds of committee members earlier in the week, chatting at length and hearing their concerns. Thus he was well prepared for the tendency of some committee members to look to strict regulation and even criminal prosecution as a protection against market excesses of the kind that led to the 1987 crash.

Questions from Democrats Riegle, Christopher Dodd of Connecticut and Terry Sanford of North Carolina were not adversarial, even though all three knew that Breeden, a staunch advocate of deregulation, disagreed with many of their views. After a hearing of barely three hours, Riegle declared his support and said he intended to report the nomination to the full Senate for action as quickly as possible.

Dodd asked Breeden to endorse the sweeping criminal prosecution of insider abuses that has put traders such as Ivan F. Boesky in jail and thrown junk bond innovator Michael Milken under a dark legal cloud. Breeden replied that, subject to “careful prosecutorial discretion . . . the potential of criminal sanctions is a helpful adjunct to the civil enforcement program” that is the prime responsibility of the SEC.

Wants Clean Market

He added, “Free markets don’t work if investors believe markets are dominated by fraud and corruption.” In the same vein, he assured Riegle that he would be, in Riegle’s words, a “fair but tough cop.”

“I am a strong believer in the free market . . . but that does not need to connote tolerance of fraud,” Breeden said. “To achieve the result of a clean market, (you need) an element of predictability in the law and the understanding that it will be vigorously enforced.”

That reply included a strong hint that Breeden favors clarifying such murky concepts as insider trading so that traders can know exactly where the line is before they can be accused of transgressing it. Some prosecutors have preferred leaving the law murky on this point to avoid giving possible targets a “road map” for staying within the law.

At another point in the hearing, Breeden said the SEC needs to modernize its statutes.

“Markets have changed enormously and that requires a willingness by the commission to look afresh. It has to be willing to rethink issues,” he said. Asked how to avert a replay of the 1987 crash, Breeden said he would encourage top-level staff exchanges to encourage cooperation between the SEC and the Commodity Futures Trading Commission, which is charged with regulating the futures market.