William H. Donaldson

Infobox Person
name = William H. Donaldson


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birth_date = June 2, 1931
birth_place = Buffalo, New York
death_date =
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alma_mater = Yale (also Harvard)
occupation = former SEC chairman (retired)
known_for = founded DLJ, founded (and dean of) the Yale School of Management, served as Under Secretary of State in the Nixon Administration
spouse =
children =
religion =

William Henry Donaldson (born June 2, 1931 in Buffalo, New York, USA) was the 27th Chairman of the U.S. Securities and Exchange Commission (SEC), serving from February 2003 to June 2005. He served as Under Secretary of State in the Nixon Administration, as a special adviser to Vice President Nelson Rockefeller, Chairman and CEO of the New York Stock Exchange, and Chairman, President and CEO of Aetna. Donaldson founded Donaldson, Lufkin & Jenrette. Donaldson attended both Yale University (B.A. 1953) and Harvard University (M.B.A. 1958). He was Chairman of the Carnegie Endowment for International Peace from 1999 to 2003. Donaldson returned to Yale and founded the Yale School of Management where he served as dean and professor of management studies. He also served in the United States Marine Corps. [ [http://www.sec.gov/about/commissioner/donaldson.htm Official biography at SEC website.] ]

While he was a senior at Yale, he joined its Skull and Bones secret society. [*cite book | author=Robbins, Alexandra | title=Secrets of the Tomb: Skull and Bones, the Ivy League, and the Hidden Paths of Power | publisher=Little, Brown | location=Boston | year=2002 | id=ISBN 0-316-72091-7 | pages=166, 173] [ [http://www.cbsnews.com/stories/2003/10/02/60minutes/main576332.shtml "Skull And Bones: Secret Yale Society Includes America's Power Elite"] , CBS News, June 13, 2004]

Donaldson is a chartered financial analyst (CFA) and has received a number of honorary degrees. Donaldson is the father of three children. He is married to Jane Phillips Donaldson.

Influence of tenure on the credit markets crisis of 2007-08

As Chairman, Mr. Donaldson presided over the meeting at the SEC on April 28, 2004, that was held at the request of the major Wall Street investment houses, including Goldman Sachs, then headed by future Treasury Secretary Henry M. Paulson, Jr.. The firms requested that the SEC release them from the so-called "net capital rule", or responsibility to hold capital reserves in their brokerage units. The complaint that was put forth by the investment banks was of increasingly onerous regulatory requirements -- in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. As at other agencies during the George W. Bush administration, the deregulatory request was received favorably by the SEC. The Commissioners voted unanimously to change the regulation.

In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms' reserve holdings if the SEC agreed to do so instead. A 1999 law, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow "voluntary" inspection of their parent and subsidiary holdings by the SEC.

Yet in the amendment taken up by the Commission, the SEC stepped back from direct oversight of the performance of the firms and adequacy of their reserve holdings. Instead, the Commission deferred to the investment houses, and decided to rely on the firms’ own computer models for determining the riskiness of investments, "essentially outsourcing the job of monitoring risk to the banks themselves." [ [http://www.nytimes.com/2008/10/03/business/03sec.html "Stephen Labaton, "Agency’s ’04 Rule Let Banks Pile Up New Debt"] New York Times, October 2, 2008]

The only briefing the Commission received that criticized the regulatory change proposed for adoption came from Leonard D. Bole, an information technology consultant, who found the risk models used by investors no better in 2004 than during the 1998 failure and bailout of the hedge fund, Long-Term Capital Management. The SEC's oversight arm took no action to contact Mr. Bole to follow up on the briefing that he submitted. [ [http://www.nytimes.com/2008/10/03/business/03sec.html "Stephen Labaton, "Agency’s ’04 Rule Let Banks Pile Up New Debt"] New York Times, October 2, 2008]

According to one of the SEC Commissioners of the period, Harvey J. Goldschmid, "the 2004 rule making gave us the ability to get information that would have been critical to sensible monitoring, and yet the S.E.C. didn’t oversee well enough." [ [http://www.nytimes.com/2008/10/03/business/03sec.html "Stephen Labaton, "Agency’s ’04 Rule Let Banks Pile Up New Debt"] New York Times, October 2, 2008] Many of these failures to follow through on oversight responsibility are further documented in SEC Office of the Inspector General reports. [ [http://www.sec.gov/about/oig/audit/2008/446-a.pdf "SEC's Overight of Bear Stearns and Related Entities: Consolidated Supervised Entity Program," Office of the Inspector General, United States Securities and Exchange Commission] , September 25, 2008.] [ [http://www.sec.gov/about/oig/audit/2008/446-b.pdf "SEC's Oversight of Bear Stearns and Related Entities: Broker-Dealer Risk Assessment Program," Office of the Inspector General, United States Securities and Exchange Commission] , September 25 2008.]

References