Crisis Management Dominates SEC Chairman’s Agenda : Securities: Richard C. Breeden has had to deal with a 190-point plunge of the Dow Jones industrials and an earthquake.

The new chairman of the Securities and Exchange Commission pulls up to work each day in a red Porsche with a vanity license plate, “1RCB1,” and a bumper sticker that says, “Nuke the Duke.”

A beeper on his belt and a fax machine in his Virginia home keep him in touch with his staff. Six clocks, newly mounted on his office wall, remind him of the trading hours of stock exchanges in London, Chicago, New York, Sydney, Tokyo and Hong Kong.

Richard C. Breeden, at 39, one of the youngest SEC chiefs ever, is on the move.

In his first two months in office, crisis management has dominated Breeden’s agenda. He has confronted the stock market “mini-crash” in October, the San Francisco earthquake that forced West Coast trading to be transferred elsewhere and sensitive dealings with Congress and the Bush Administration over market reform legislation and the savings and loan debacle.

But Breeden has found time to begin placing his personal stamp on a regulatory agency whose concerns vary from protecting small investors against unscrupulous stockbrokers to regulating multibillion-dollar corporate takeover fights.

A former attorney with major law firms in New York and Washington, Breeden served in the Bush presidential campaign. His bumper sticker is a leftover insignia of that battle.

While he has a strong bias toward allowing market mechanisms to work with the least possible government interference, Breeden, in the mold of other top Bush Administration officials, is a regulatory pragmatist who has no aversion to supporting new regulations or tough enforcement of the law.

His experience as the Administration’s quarterback of the savings and loan bailout legislation earlier this year reinforced his belief that free markets can function effectively only with adequate government supervision and zealous enforcement.

Breeden sketched out his plans for the SEC last week during an interview in his office on Fifth Street Northwest, where new dimensions seem to reflect his ambition. Upon taking over from David S. Ruder, Breeden ordered the wall torn down that separates the SEC chairman’s office from an aide’s office next door, creating a much larger domain for himself in which he installed several additional telephones end created three separate work areas.

The SEC chairman believes that increasing competition, globally and domestically, will benefit investors. In that regard, he is eager to end restrictions on the ability of banks to compete with brokerage firms, provided safeguards are put into place that protect the federal government against the possibility of widespread bank bailouts.

Breeden also cited increasing stock market stability and investor confidence as major goals.

In the aftermath of the stock market plunge in October, he showed his independence from the Treasury--and from the laissez-faire economists who dominated regulatory thinking during the Reagan Administration--by vigorously supporting a bill that would require Wall Street brokerage firms to disclose more information about trading by major market players and more details about risky financial dealings they have engaged in to finance corporate takeovers.

Over the initial objections of the Treasury, which was opposed to any SEC restriction on the computer-directed program trading that has been blamed for adding to stock market volatility--Breeden crafted compromise language that would give the SEC the authority to restrict certain abusive trading practices during periods of market turmoil.

“I still want to get it passed,” Breeden said, adding that he intends to make passage of the bill a high priority next year, along with efforts to encourage Congress to lift pay ceilings for SEC employees and provide additional funding to upgrade technology, especially for SEC enforcement lawyers.

Legislative Skills

Breeden knows how to work Washington, which was an unfamiliar environment for his predecessors, Ruder and John S. R. Shad. Utilizing knowledge of the congressional process and expertise as a draftsman that he said he developed in private legal practice, Breeden spent hours on the telephone one recent evening with Reps. Edward J. Markey (D-Mass.) and Matthew J. Rinaldo (R-N.J.), suggesting new legislative language that could be used to satisfy all parties involved.

“That was to me one of the most productive sessions I’ve had as chairman of any committee,” said Markey, who is chairman of the House telecommunications and finance subcommittee that oversees the SEC.

“In terms of my dealings with him on the market reform legislation, I have a good feeling about the process,” Markey continued. “He is representative of the pendulum swinging back from the blind, deregulatory zeal of the Reagan Administration. I think Breeden believes in sensible governmental regulation of our markets.

“His toughest test will be his ability to remain independent. I think his political relationship with George Bush is a double-edged sword. He does have access but he also has to maintain his distance and independence from being dictated to by other agencies that also have close relationships on that score.”

Richard Ketchum, SEC market regulation director, said of Breeden: “He is exceptionally quick on his feet. He is one of the best drafters on the fly I have ever seen.”

Several Wall Street executives noted that Breeden seems to have injected new energy into the commission. “I see it in the staff and the people we deal with,” said Martin Lipton, New York takeover lawyer. “He has been very successful in creating enthusiasm.”

Kathryn McGrath, head of the SEC’s division of investment management, said of Breeden: “He hasn’t come roaring in here with the view that, boy, he was going to clean up this pack of dumb bureaucrats. He came in here and at least led everyone to believe he had a lot of respect for and confidence in the staff. It hasn’t been hard to work with him because of that.”

Married and the father of three children, Breeden frequently works from 8 a.m. to 10 p.m. and his full schedule--and proclivity for dropping everything to take a phone call from a member of Congress--often makes him late for meetings.

But he is popular with the newly energized SEC staff, whose members describe him as a dynamo who is extremely demanding but smart enough to know when to rely on the staff for advice and when to maintain a low public profile. He has won the support of the staff, in part, by launching an aggressive campaign to push Congress to lift pay ceilings for SEC employees.

Another advantage he will have in putting his imprint on the agency is the ability, early in his tenure, to influence the selection of a majority of SEC commissioners.

One of the critical things that Breeden has done during his two months on the job was to select a new director of enforcement for the agency, the second-most powerful position at the SEC. He chose an insider: William G. McLucas, who had been an associate director. Also on Dec. 26, he announced the creation of a new unit to investigate stock sales by thrifts and their parent companies.

In addition to favoring tough enforcement of securities laws and financial standards to protect investors around the world, Breeden sees himself as an advocate for U.S. brokerage firms as they compete against European and Japanese investment houses. Given his close relationship with President Bush, the SEC chairman is likely to receive Administration support for his program.

Trade Concerns

At times, Breeden sounds more like a minister of trade than Wall Street’s top cop, and he has already targeted a specific American financial product for export: mutual funds. Breeden wants Japanese regulators to make it easier for the highly successful U.S. mutual fund industry to market its investment funds to individual investors in Japan.

“If you look at the number of California banks that are owned by Japanese institutions, we make it widely possible for Japanese firms to offer retail services in the United States,” Breeden said. “I want to see the exact same ability offered to American financial services firms--not just to deal on an institutional basis in Japan, but to offer services on a retail level. We have the best products in the world in that area, and we ought to be able to offer them to Japanese consumers.”

Breeden’s plans in the international arena go well beyond helping U.S. investment firms open doors overseas and are likely to expand investment opportunities available to U.S. investors.

For example, he wants to make it easier for U.S. investors to buy stock in foreign companies. He has already started working with multinational corporations and foreign regulators to make it simpler for corporations, which face widely varying regulatory standards for disclosure, to simultaneously proceed with offerings to investors in the United States and Europe.

With a broad perspective shaped by his legal and government background outside the securities business, Breeden is inclined to waive certain SEC regulations that have discouraged American and foreign companies from proceeding in the United States with takeover bids and stock and bond offerings.

When Ford Motor Co. recently wanted to proceed simultaneously in the United States and Great Britain with its takeover bid for Jaguar PLC, Breeden worked closely with Linda Quinn, SEC corporation finance director, to waive certain SEC regulations that conflicted with British law so that the offer could go forward in both markets.

“I want investors outside the United States to be able to freely participate in the U.S. markets, and I want U.S. investors to be able to participate in markets outside this country under appropriate safeguards,” Breeden said.

“We may allow transactions to occur that wouldn’t otherwise occur, so that investors have opportunities they wouldn’t have access to had we insisted on crossing every t and dotting every i , the exact same way we have done since 1934,” he explained.

The symbols of Breeden’s affinity for international issues are visible in his sixth-floor corner office at commission headquarters.

After the Dow Jones industrial average plunged 190 points on Friday, Oct. 13, Breeden and his comrades at the SEC were focused on what would happen in the Tokyo stock market the following Monday.

However, the SEC lacked sufficient equipment to directly monitor market movements abroad, and when Breeden asked what time to begin monitoring events on Sunday evening, no one seemed sure what the time difference was between Washington and Tokyo.

Within days, Breeden had new computer equipment installed in his office--and in the agency’s division of market regulation--providing ready access to information about foreign markets. And the new clocks went up on the wall.