REBOUND ON WALL STREET : Regulators : At SEC Chief’s Office, Silence Is the Byword
The chairman of the Securities and Exchange Commission was surrounded by a crowd of reporters shouting questions about how to halt the stock market’s plunge. At some point, the chairman said, he might talk to New York Stock Exchange leaders about “a very temporary halt in trading.”
That was Oct. 19, 1987, and the SEC chairman was David S. Ruder, who had been on the job a mere 73 days when the stock market suffered its worst one-day collapse in history. Now, during the market’s latest flirtation with disaster, his successor, Richard C. Breeden, has been on the job just since last Wednesday.
But Breeden proved Monday that he had learned one lesson from Ruder: He kept his mouth shut. If you don’t say anything in public, the press can’t misunderstand you, and you won’t add to the general sense of panic.
“Even a report that the SEC is considering asking for a trading halt is enough to make the markets nervous,” Ruder said in an interview Monday. “That’s not to say I wouldn’t consider such a step again. But I just wouldn’t mention it.”
Breeden has been working the phones vigorously since the crisis began Friday, talking to market participants such as brokerage firms, investment banking houses and mutual funds. He has stayed in contact with other regulators, with key members of Congress and with the White House. But he has offered not a single word to the general public.
The official silence is an effective operating technique for Breeden, a 39-year-old native of Manhattan Beach.
As a White House staff member earlier this year, Breeden was one of the key players in devising the Bush Administration’s plan to rescue the federal savings and loan insurance fund. He worked behind the scenes, cajoling, explaining and arguing for the Administration plan with reluctant and uncertain members of Congress and financial industry executives.
His contacts with Congress helped Breeden win confirmation by the Senate without any serious challenge. He carefully paved the way through private meetings with Senate Banking Committee members before his confirmation hearing last month.
Breeden told the Banking Committee in September that the SEC would never try to shut down trading in chaotic markets. “I would not consider such a step,” he said flatly.
When Ruder merely mentioned a trading shutdown as an option during the 1987 crash, jittery markets became still more nervous.
The Dow Jones industrial index was down 100 points when Ruder began his speech almost two years ago at an investors conference here, and it had fallen another 100 points by the time he emerged into a swarm of cameras and microphones.
Ruder emphasized then that only the exchanges themselves could halt trading, but the distinction was lost in the clamor.
He carefully hedged his comment: “I’m not afraid to say that there is some point, and I don’t know what that point is, that I would be quite anxious to talk to the New York Stock Exchange about a very temporary halt in trading.” This was translated into news bulletins that the SEC chairman was thinking of shutting the markets.
“On reflection, it would have been better if I had said nothing,” Ruder said Monday in a telephone interview from a Washington apartment, where he was surrounded by packing boxes. He is completing a move to Chicago, where he is a professor at the Northwestern University school of law.
After the 1987 crash, Ruder instituted some reforms that helped ease the burden of crisis management for Breeden. There are telephone hot lines in place between federal regulators in Washington and the nation’s securities and commodities exchanges. “It’s so very important to have information, to find out what the dangers are,” Ruder said.
He gave Breeden high marks in the latest crash. “From what I read in the papers, I would say to him, ‘Keep up the good work.’ He has been in constant communication with the exchanges, other regulators and the broker-dealer community.”
