We've noted before that the chief economist job at the SEC is critical to the regulatory  function. So Craig Lewis--who has been tapped as the new chief economist and head of the SEC's Risk, Strategy and Financial Innovation division--has a tremendous opportunity ahead of him.

Although Dodd-Frank has been passed into law, specific rules are still being worked out by the SEC. Some of these rule-making efforts require economic analysis. In addition, sound economic analysis has on many occasions been used to ferret out crime on Wall Street. The recent options backdating scandals is a good example of that.

Perhaps the best example is the order handling rules passed down in 1997. The SEC launched an investigations after a group of academics (led by William Christie and Paul Schultz) showed that market makers were most likely colluding to maintain artificially wide spreads. The effect of that academic work has certainly been profound. Recall that the subsequent antitrust suit against the Nasdaq resulted in ECNs integration into the market. This is not to say that Lewis, formerly of Vanderbilt University, will be under pressure to do something mind-boggling right off the bat. Given the tumultuous recent history of the top economist job, the main hope is that he ushers in a new period of stability.

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