“Ay, tear her tattered ensign down!
Long has it waved on high,
And many an eye has danced to see
That banner in the sky.”

So wrote Oliver Wendell Holmes Sr., about “Old Ironsides,” the U.S. Constitution — once the pride of the U.S. Navy — on learning that the Navy planned to scrap its “eagle of the sea.” Similar thoughts may come  to mind on reading press reports that the Obama administration was considering shifting some of the U.S. Securities and Exchange Commission’s jurisdiction to other agencies.

Although the administration appears to have backed off from more extreme plans to merge the SEC in a major consolidation of agencies, the SEC may still surrender authority in three directions: (1) to the Federal Reserve Board to the extent that the latter is made the “systemic-risk regulator”; (2) to the Federal Deposit Insurance Corp. as the new czar over the liquidation of troubled financial institutions; and (3) to a new consumer protection agency that may be given broad jurisdiction over consumer financial products. Such an agency might supervise insurance, mortgage lending practices, credit cards and potentially mutual funds. Mutual funds have, of course, always been regulated by the SEC, but the SEC sustained a major black eye for its failure to detect Bernard Madoff. Inept as some divisions of the SEC may have been, however, it does not follow that moving around the boxes on a regulatory design chart will improve matters. Rather, the focus should be on what individual agencies do well — and less well.

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