Dan Smolin asks a good question: Why should we assume that the SEC's Mary Schapiro will make a U-turn in 2009, given that Schapiro has spent her entire career inviting brokerages to "self-regulate" and doing everything in her power to keep consumers at bay when they are ripped off and kept in the dark by brokerages? The easy answer is that we shouldn't assume that Schapiro will all of a sudden go to bat for the consumers. After all, Schapiro "has been at the very center of a failed regulatory process for the past two decades." We know where her loyalties lie, just like we know that Tim Geithner will never turn hard against Wall Street to clean up the corruption (see here for more details on Geithner--and here). Truly, years of actions speak much more loudly than months of words for both Schapiro and Geithner. I am convinced that Obama doesn't have the horses he needs to clean up Wall Street corruption. It's a typical modern conundrum where you need a highly motivated powerful outsider to get the job down, but there simply aren't enough highly motivated powerful outsiders. If Mary Schapiro had even an iota of interest in protecting consumers, Smolin wouldn't be needing to advocate for the following changes he is now pushing--they would have been a reality years ago:

1. Abolish the mandatory arbitration system and give investors back their constitutional rights;

2. Abolish "self regulation" by FINRA, which is a sham. The brokerage industry should be regulated by a governmental authority with the power to do so effectively. The SEC would be the likely agency to do so, with the right leadership;

3. Require brokerage statements to:

(a) Disclose the risk of every portfolio, as measured by standard deviation; (b) Compare the returns of every portfolio to a portfolio indexed to benchmarks of comparable risk; and (c) Disclose the "cost equity" of the portfolio, which is the amount the investor must make to break even, after payment of commissions, fees and margin interest. Common sense, right? Why aren't these reforms a reality? Good question. And why is a terribly motivated person like Mary Schapiro still sitting there pretending to be a reformer?