New SEC Head: Mary Shapiro. New CFTC Head: Gary Gensler. Combine The Two Groups?

Obama has picked Mary Shapiro to succeed Chris Cox as head of the troubled SEC. The securities industry regulator has taken hits over lax oversight of Lehman Brothers and Bear Stearns and also is currently getting slammed for missing (or perhaps ignoring) the $50 billion in fraud committed by Bernard Madoff.

Shapiro is now the head of the Financial Industry Regulatory Authority, the largest non-government securities regulator. She was an SEC commissioner for six years in the Reagan and Bush I administrations and was head of the Commodity Futures Trading Commission from 1994 to 1996 under Clinton. The CFTC oversees $5 trillion in derivatives trading. It wasn’t until 2000 that the CFTC was “modernized” under the Senate leadership of Phil Gramm and deregulated most derivatives trading that led to Enron’s fall and the market for credit default swaps. Obama will also name Gary Gensler, a former U.S. Treasury undersecretary, to head the CFTC.

There’s talk of combining the two agencies since derivatives and traditional securities have become inextricably linked in our financial system, and Shapiro is believed to be a good candidate to lead this effort given her background.