UCLA economists say FDR extended the depression by years by spending, where Reagan ended Jimmy Carter's recession by letting the economy ride it out. Are we going to go with taking advantage of a crisis for political gain or going with what is proven to work for the good of the people?

So here it is: The FINRA (the "Self Regulatory" authority that Ms. Shapiro runs) is NOT truly new, it is the newly consolidated NASD (National Association Of Securities Dealers) and NYSE Regulatory Body. Both have existed for many years - and it has been a mandate amongst the regulatory powers that be to consolidate the power of regulation into one SRO. So a more accurate picture is that the NASD absorbed the oversight of the NYSE into itself - and then changed it's name to FINRA. Why is this so important? Bear with me for a moment or two more…

The FINRA (and it's successor the NASD) have direct oversight of Broker Dealers in the US. NOT the SEC. Let me repeat in other words: Broker Dealers are subject to several layers of regulatory oversight - and the chief regulator, ie the one that Broker Dealers deal with on a daily basis is the FINRA. Broker Dealers (particularly the larger ones) are being audited by the FINRA on a continuos, ongoing basis. The FINRA assesses the health of Broker Dealers, handles prosecution for errors, and assesses fines to Broker Dealers. NOT THE SEC. While the SEC does have OVERALL responsibility for the securities markets (and all facets of the securities markets), until the recent crisis, It was the FINRA that had the day to day responsibility for regulation of broker dealers. Far from being a benign, quiet paper tiger, the FINRA is widely percieved amongst owners of broker dealers to be aggressive, capricious, and draconian in punishments - for the vast number of broker dealer owners. In fact, the FINRA has had an agenda of shutting down small broker dealers, and life is very difficult for owners of small broker dealers because of this. The SEC is not really on the radar screen for Broker Dealers, since they are dealing with the FINRA on a daily basis.

It is well to keep in mind that the vast number of broker dealers are small family run enterprises. The FINRA describes a "small" broker dealer as having 150 Registered Reps or fewer. However, the vast majority - some 80% of broker dealers - are so called small broker dealers, with an average of 14 or so registered reps.

So if the FINRA has had the ball, insofar as regulation of Broker Dealers, this brings up several questions: One - why did it fail it's job so miserably? Two - In light of this failure, why do we hear next to nothing in the media about it? Three - who is trluly responsible for the failure of oversight, and who should be blamed? And of course the biggie, what should be done about it?

Answer One: The head of the NASD (which became the FINRA) had one overriding goal over the last decade or so: consolidation of regulatory authority into one entity, the NASD, which it finally accomplished with the merger of the NASD and the NYSE regulatory component. But the sad fact - and this can be verified by a study of the publicly published regulatory actions of the FINRA - is that the consolidation effort took a tremendous amount of work and focus. A decision was made back in the Glauber Days (he ran the NASD prior to the current administration) to focus on the "low hanging fruit" the small broker dealers. Why? Simple. Insufficient resources. Whether it was impossible to challenge the Big Five broker dealers because of the power of the individuals in charge, or whether it was simply a difficult and losing proposition because they have so many layers of lawyers who are well funded and determined to stymie any enforcement actions, it is a FACT that the Big Firms began to run amok and pay fines (paltry in comparision to the scope of their wrongdoing) as a tax on business. The small firms, however, did not have the wherewithall to mount effective defenses to FINRA challenges. And so regulation of the small firms became something of a nit picking, rule based game - while the violations at the small firms most often didn't effect investors or the public trust. Fines like $50K for failing to file a report on time. Whereas the majors were engaged in illegal mutual fund trading - which cost investors Billions - but the fines were minor. So, in a nutshell, the decision was made at the FINRA, as a matter of POLICY, to focus on the easily attainable low hanging fruit of rule based violations at small firms - while Big Firms were left to run amok. Even while under constant audit, the Big Firms continued to run bigger and bigger games, in an environment where for them, there was a conspicuous lack of regulation.

Answer Two: Why do we not hear about the true story, and why does it matter? To put it succinctly, self preservation. The individual running the FINRA receives some $6M in annual compensation- whereas the head of the SEC makes some $250K. Huge difference. This simple fact gives one insight into the potential conflicts that existed… But AFTER the crisis hit - a crisis which was fomented by the failures of all regulation and PARTICLARLY the FINRA, the Treasury took over regulation of the Big Firms, such as they still exist, and left the FINRA with oversight of small firms only. The Big Firms became Banks as well, and the FINRA doesn't regulate Banks. While the crisis grew and spread, the FINRA remained curiously silent, and all eyes turned toward the SEC. But the actual interaction of the reglatory bodies is complex enough not to fit into a soundbyte. It is easier to just point to the SEC, the overall regulator - and to ignore the actual regulatory arm charged with the actual regulation.

Answer Three: So who is truly responsible? ALL of them. But in a practical sense, the group that was directly responsible for the regulation of broker dealers is and remains the FINRA. Of course the entire regulatory matrix should be held accountable for the failure. Why was the FINRA allowed to set it's own focus and create this crisis? It would be innapropriate to single out any individuals when so many failed at so many levels.

However, we do have to assess blame. If for no other purpose than to move forward, and set a new and workable regulatory standard.

And here is where Obama's Appointment fails miserably. Obama has appointed - to run and reform the whole shebang - the very individual who made the policy that allowed the largest crisis in financial history to happen. Were it a simple oversight, this wouldn't even be forgivable. Maybe forgivable, but one would not promote that individual; they might be allowed to retire quietly.

So here it is: Obama has actually appointed a person who has made conscious, well thought out Policy that was transformative in it's failure - to now transform the entire industry!

Talk about throwing gas on the fire! Bottom line: if you feel recent regulation has been successful, let Obama's appointment do the same thing for the entire financial services industry. But if you have an incling that the recent crisis was not the best thing that could have happened to our financial system, or if you are one of the couple hundred million people who has been hurt by the recent financial crisis, you might want to take some action and have Obama think it through a little more clearly.

We need change at this point. The stakes are too high to ignore because the issues don't compress well to soundbytes.

And failure should not be promoted. Despite the likeability factor. Despite the Capability factor. History has shown us that plenty of very capable people have lead us down the wrong course. At some point actions have consequences. Consequences should not be ignored. History is not doomed to repeat itself as long as thinking individuals act.