The New York Times reported on Wednesday that Sallie Krawcheck, formerly of Citi and Bank of America, is the leading contender to be named chairman of the Securities and Exchange Commission. Let's hope that President Obama comes to his senses and names someone more fit to the post. From the Times: With Ms. [Mary] Miller withdrawing, Sallie L. Krawcheck, a long-time Wall Street executive, has emerged as a potential front-runner. Over the last year, she has become a familiar face in Washington, making the rounds with lawmakers to discuss consumer issues. – Reuters

Dominant Social Theme: Only the honesty of regulators can salvage the market.

Free-Market Analysis: At Reuters, Kate Long has decided that Sallie Krawcheck is not suitable to head the Securities and Exchange Commission. Long points out that she has worked in regulation for many years and has a good idea of what is necessary for a top official to exhibit in terms of personal and professional capacities.

She writes, "There are some particular kinds of personality traits that are necessary to herd and motivate an agency of over 1,000 lawyers. Based on my reading of her record, Ms Krawcheck is not qualified to take on this role."

She then describes what the SEC does. It is organized around two basic functions, she explains. The regulator composes the rules by which the financial markets live. The SEC also supervises various self-regulatory agencies including stock exchanges and broker dealers.

The SEC also interfaces with the Commodities Futures Trading Commission (CFTC), the Congress, the Federal Reserve, the Office of Comptroller of the Currency, foreign securities regulators and deals with the Financial Accounting Standards Board, according to Long.

Long believes these various tasks demand "the highest ethics." She also believes Krawcheck's ethics are lacking.

This is because, according to Long, Krawcheck presided over the "the largest scandal of the financial crisis … Her performance suggests that she does not have the skills or the temperament to run our nation's primary financial regulator." Here's more …

Krawcheck was appointed CFO of Citi in 2004, and she was asked to step out of the role in March 2007. As CFO, she was responsible for overseeing the accounting of the firm's assets, the largest portion of which were asset backed securities. Just 20 months after her dismissal, Citi was a hair's breath away from collapse. The Federal Reserve had to guarantee over $300 billion of Citi's assets. Here is the the Fed guaranteed from the term sheet:

Asset pool consisting of loans and securities backed by residential real estate and commercial real estate, and their associated hedges, as agreed, and other such assets as the U.S. Government (USG) has agreed to guarantee. Each specific asset must be identified on signing of guarantee agreement. Assets will remain on the books of institution but will be appropriately "ring-fenced."

She then quotes the New York Times of November 2008 as saying that Ms. Krawcheck apparently did not do well as Citicorp CFO. She didn't know what to do after the core business began to weaken as the subprime crisis struck.

"There was not an appropriate amount of understanding of the risks they bore," said Gary B. Townsend, who heads Hill-Townsend Capital, a firm that invests in the financial services industry, when asked about Ms. Krawcheck's tenure. "The chief financial officer has to be able to assess the myriad risks that a large financial institution faces."

The result of this was that Ms. Krawcheck was removed as CFO in what amounted to a very public spanking. She didn't take it meekly, either. She resigned.

Long has no sympathy for Krawcheck, writing that she left behind "the largest stinking mess of asset backed securities this nation has ever seen."

And she adds, "This is not the type of person we need to restore trust and transparency to financial markets. Please keep searching, President Obama."

Of course, Obama is perhaps not the best person to address these concerns. A six-month investigation into fundamental personal documents found them to be forged. He has embargoed even his kindergarten records.

As far as the larger fedgov goes, it probably could use a stiff dose of transparency, as well. The Pentagon still hasn't identified where US$2 trillion vanished to just before 9/11. And Osama bin Laden´s recently announced death is fraught with questions, as well.

Even Obama's re-election is plagued with accusations of corruption. And the whole idea of regulatory democracy is based on a kind of price fixing. When legislators pass bills, they demand the transfer of assets by force. How is this protecting anyone, let alone investors?

Regulation doesn't really protect anyone. If those who say they are concerned about investors wanted to do something positive, they'd shut down central banks and allow money to circulate freely. In the meantime, those invested in the process will continue to peddle these dominant social themes.