Joseph Kennedy Appointed First SEC Chairman - Wall Street Insider to Police Wall Street

President Roosevelt appoints Joseph P. Kennedy, a wealthy Wall Street speculator known for stock manipulation and insider trading, as the first chairman of the newly-created Securities and Exchange Commission on July 2, 1934. The appointment shocks New Deal reformers and delights Wall Street, embodying FDR’s controversial strategy of using an industry insider to police the industry. When questioned about appointing a notorious stock manipulator to regulate securities markets, Roosevelt allegedly replied, “Set a thief to catch a thief.” Kennedy had amassed a fortune during the 1920s through stock pools, market manipulation, and trading practices that the SEC would subsequently outlaw.

Kennedy’s appointment represents an early example of the revolving door between Wall Street and regulatory agencies that would become a persistent feature of American financial regulation. Supporters argue that only someone intimately familiar with Wall Street’s manipulative practices could effectively regulate them; critics contend that placing a market manipulator in charge of market regulation invites capture. Kennedy serves only 431 days as SEC chairman before resigning in September 1935, during which time he establishes the agency’s organizational structure and initial enforcement priorities while maintaining cordial relations with the financial community he nominally regulates.

The Kennedy appointment establishes a precedent for staffing regulatory agencies with industry insiders, justified by claims of technical expertise but creating structural conflicts of interest. While Kennedy’s SEC does adopt significant regulations including securities registration requirements and disclosure rules, the choice signals to Wall Street that New Deal regulation will be administered by those sympathetic to industry concerns. This pattern of regulatory leadership drawn from regulated industries becomes standard practice, contributing to the cycles of regulatory capture that undermine financial oversight in subsequent decades (1970s deregulation, 2008 financial crisis, 2010s enforcement failures). Kennedy later serves as Ambassador to the United Kingdom and becomes patriarch of the Kennedy political dynasty, his Wall Street fortune funding his sons’ political careers.