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Congrats to Troy Paredes

CNNMoney.com:

President George W. Bush on Tuesday nominated Washington University Law School professor Troy Paredes to the Securities and Exchange Commission,

If confirmed by the U.S. Senate, Paredes would replace Paul Atkins, a Republican SEC commissioner who announced Monday that he will step down once his successor is in place. Paredes would serve a five-year term ending in June 2013.

The five-member commission has been reduced to three Republicans, the maximum allowed by law from a single political party. Bush has nominated Atlanta attorney Luis Aguilar and Financial Industry Regulatory Authority senior executive vice president Elisse Walter to fill two openings for Democrats; the Senate has yet to act on the nominations. ...

Paredes’s supporters describe him as a bright and thoughtful lawyer with a keen interest in policymaking.

That’s exactly how I’d describe him. I think it’s a great choice.

The article continues:

His published works provide some keys to his views on regulation. In working papers in 2006 and 2007, Paredes took issue with a controversial SEC rule increasing oversight of hedge fund advisors. The 2004 rule, adopted despite opposition of Atkins and fellow Republican commissioner Cynthia Glassman, was overturned by a federal appeals court in 2006.

Politics may have been partly responsible for the SEC’s decision to regulate hedge fund managers, Paredes suggested. He wrote that it appears the SEC “did not want to get caught flat-footed and criticized again” as it had after accounting scandals erupted at big-name companies such as Enron Corp. and WorldCom Inc.

“The SEC may have correctly believed that it had to do something when it came to hedge funds to fend off a Congress that may be anxious to fill any perceived regulatory void with new legislation,” wrote Paredes.

Although regulators typically find themselves choosing between regulating and doing nothing, Paredes outlined a third option: recommend best practices and leave compliance up to the industry.

Paredes said a best-practices approach would check “an exaggerated concern over fraud and investor losses” and “dulled sensitivity to the costs of greater investor protection” that could undercut other SEC missions, such as encouraging capital formation.

According to the university’s Web site, Paredes received a grant in 2005 from Microsoft Corp. (MSFT) to study the economics of technology companies. He received another grant that year from the Boeing Center on Technology, Information and Management to examine how companies disclose events in financial reports.

Being nominated to fill a Republican slot on the Commission would seem to out Paredes politically. FWIW, the CNN article includes this factoid:

The Center for Responsive Politics lists Paredes as having donated $250 to the Missouri State Republican Committee in 2004.

I wonder if Troy gave any thought as to the impact being outed as a Republican will have on his post-SEC academic employability! 

More seriously, if Troy is perceived as filling a GOP slot, will the Senate Democrats be tempted to delay his appointment until after the Presidential election. Assuming Obama wins in November, the Democrats will be entitled to 3 out of the 5 SEC commissioner slots. So why fill a GOP slot with a guy who can serve to 2013?

I hear rumors, however, that Chairman Chris Cox will step down after the election, which would create a vacancy that could be filled with a third Democrat even if Paredes makes it through the Senate.

Update: CFO.com quotes our friend Larry Ribstein:

Paredes had been among four candidates being considered for the nomination, beating out three securities lawyers. Larry Ribstein, a professor at the University of Illinois College of Law, was hoping in February that Paredes would get the nomination, noting his criticism in 2006 of the SEC’s decision to regulate hedge funds and his “concern that political and psychological influences result in overregulation.”

“It would be great if somebody who understands both the causes and possible cures of excessive regulation of financial markets were actually in a position to put that understanding into action,” Ribstein told CFO.com. “I think Paredes is such a person. At the same time, I think he understands the need for and importance of appropriate regulation of financial markets.”