SEC Doesn’t Need Additional Powers, New Chief Says

The new chairman of the Securities and Exchange Commission told Congress Wednesday that his agency does not want new power to close the nation’s stock markets during times of turmoil, for fear that the prospect of shutdowns would heighten uncertainty and risk sparking a panic.

Richard C. Breeden, who assumed the SEC post two days before the stock market’s 190-point slide on Oct. 13, said the plunge showed that the reforms of 1987 are working and additional enforcement powers are not needed.

“We have dealt with this problem in a way that we regard as substantially superior to that contained in this legislation,” Breeden told a House Energy and Commerce subcommittee that is mulling a bill to give the SEC shutdown power. “We should not panic in the face of (recent) events.”

Instead, Breeden suggested that the panel give regulators authority to collect more detailed information about trading--by requiring brokers to report large-volume trades and to disclose shaky operations in their own firms or in those of affiliates.

He pledged that “if we conclude from our analysis” of such new data that new legislation is needed, “we certainly will bring forward recommendations.” In the meantime, he asked the panel to “defer” its legislation.

Breeden’s comments, delivered during testimony that constituted his first public pronouncements since assuming the SEC post, appeared to cast new doubt on the eventual fate of the subcommittee’s proposal. His predecessor, David S. Ruder, had backed the legislation.

Rep. Edward J. Markey (D-Mass.), the panel’s chairman, appeared adamant in demanding that Breeden accept the new shutdown powers he was being offered. But the subcommittee seemed split along party lines, and analysts said that without backing from the SEC the measure could well die.

Breeden also told the panel that he wants authority for the SEC to require banks, savings and loans, insurance companies and futures commission merchants--which often provide financing in larger deals--to report potential risks, just as the bill would have brokers do.

But he stopped short of saying he is willing to continue the efforts of Ruder, now a Northwestern University professor once again, to take away regulation of stock index futures from the Commodity Futures Trading Commission.

He said the SEC, the CFTC, the Treasury and the Federal Reserve are cooperating closely and are working effectively. All are members of an informal working group set up to monitor market problems in the wake of the October, 1987, crash when the Dow Jones industrials plummeted 508 points.

In a few light exchanges with subcommittee members, Breeden, a 39-year-old former securities lawyer, acknowledged that he had had a hectic first two weeks in office. Until recently, Breeden was an issues analysis assistant to President Bush.

On his second full day at work--Friday, Oct. 13--the stock market plunged 190 points. Four days later, an earthquake hit San Francisco, sending psychological aftershocks through the nation’s financial markets. And on Tuesday, the stock market dropped 85 points and then gained back 81.

But Breeden insisted that the turmoil had provided “some important lessons,” demonstrating that mechanisms instituted after the 1987 Black Monday plunge had worked and had helped hold the latest slide in check.

Specifically, he cited the triggering of so-called circuit-breakers that automatically suspend trading whenever prices rise or fall beyond a preset pace and companion procedures that give orders from individuals priority over institutional investors during such periods.