Paul Atkins Misreads Adam Smith and the American Founding – The FinReg Blog

On June 30, Paul Atkins, chairman of the Securities and Exchange Commission, stood before the Economic Club of New York and delivered a history lesson. With the nation’s 250th birthday days away, Mr. Atkins told his audience that the Declaration of Independence and Adam Smith’s “Wealth of Nations,” both products of 1776, rest on “the same conviction: trust the individual, not the institution.” America’s founding documents, he said, “in many respects, reflect Smith’s central themes,” and the founders, wary of concentrated power “whether lodged in a crown, in a parliament, or in a bureaucracy,” built around liberty a governing framework “as light as prudence would permit.”

The problem is that Mr. Atkins turns the coincidence of 1776 into kinship, and kinship into influence. He then conscripts that invented founding into a deregulatory agenda, capped by a wholesale retreat from cryptocurrency enforcement, that America’s founders would have recognized as a corruption of republican government.

Start with the Declaration. Mr. Atkins’s most concrete evidence is Jefferson’s well-worn copy of “The Wealth of Nations.” But the Monticello source cited in his own footnote reports that Jefferson acquired the book while serving in France between 1784 and 1789, at least eight years after he drafted the Declaration. Jefferson may have encountered Smith’s ideas before 1776, but there is no evidence that “The Wealth of Nations” shaped the Declaration. On the contrary, Jefferson told James Madison in 1823 that he “turned to neither book nor pamphlet” while writing it. Asked by Henry Lee in 1825 about its sources, he described the Declaration as “an expression of the American mind,” reflecting the “harmonising sentiments of the day” embodied in “the elementary books of public right, as Aristotle, Cicero, Locke, Sidney, etc.”

By fusing America’s founding to “The Wealth of Nations,” Mr. Atkins turns Smith’s defense of free markets into a justification for weakening public oversight of politically favored financial interests. Notice that Atkins’ catalog of dangers includes crowns, parliaments and bureaucracies, but omits the economic factions the founders also recognized as potential threats to republican government. James Madison warned in Federalist No. 10 that “the most common and durable source of factions has been the various and unequal distribution of property,” specifically identifying the landed, manufacturing, mercantile and moneyed interests. Jefferson made the point even more explicitly. Writing in 1816, he called for the nation to “crush in its birth the aristocracy of our monied corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country.”

The founders valued private property and encouraged commerce. But they also recognized a basic republican principle that Mr. Atkins ignores: power can threaten liberty whether it is wielded by the state or by private interests wealthy enough to bend the state to their will.

That missing half of the founding tradition becomes impossible to ignore when Mr. Atkins turns to cryptocurrency. He boasted that the S.E.C. is answering President Trump’s call “to make America the Crypto Capital of the World.” In practice, that has meant dismissing, or settling on favorable terms for the defendant, the majority of outstanding cryptocurrency enforcement actions, several of them involving defendants with business ties to the president or his family.

The crypto industry helped underwrite the political conditions for this solicitude. It was the top corporate donor in the 2024 election cycle and has already amassed a nine-figure campaign arsenal for the coming midterms. And the president is personally invested in the outcome. His own financial disclosure reports that he earned more than $1.4 billion in income from his family’s crypto ventures in 2025.

Mr. Atkins’s crypto agenda is difficult to reconcile with his tribute to Adam Smith, because Smith did not regard money and banking as a realm beyond public law. He welcomed privately issued bank notes redeemable in gold or silver, recognizing them as an efficient means of facilitating commerce. But when Scottish banks issued small-denomination notes whose failure would fall hardest on poor laborers, Smith endorsed restricting them, conceding that the rule violated “natural liberty” but defending it as “exactly of the same kind” as requiring party walls to stop the spread of fire.

The Constitution reflects a similar instinct. Having witnessed the paper currency issued by the Continental Congress depreciate into worthlessness, the Framers vested authority over the nation’s monetary system in Congress, giving it the power to “coin Money” and “regulate the Value thereof,” while forbidding the states to coin money, issue bills of credit or make anything but gold and silver legal tender. They did not prohibit private bank notes, but they made clear that establishing the nation’s monetary framework was a public responsibility. In different ways, Smith and the Framers reached the same conclusion: private monetary innovation has a place, but it must remain subject to public law. Mr. Atkins’s crypto agenda is difficult to reconcile with that principle.

Mr. Atkins closed with a warning about socialism, in an unmistakable shot at Mayor Zohran Mamdani and other New York leaders who, he said, “are beginning to speak the language of control rather than of freedom.” He even quoted President Trump’s warning that under communism “great violence proceeds at levels never seen before.” But those warnings ring hollow coming from an administration that has repeatedly intervened in private markets, including by taking ownership stakes in private companies, while extending preferential treatment to politically connected firms. A warning about political violence likewise loses its force when its cited authority incited a mob to halt the peaceful transfer of power and then pardoned participants who beat police officers.

If Mr. Atkins is looking for a lesson about socialism, he might begin with the history of the agency he leads. American communism attracted its largest organized following during the Great Depression, after a stock market rife with fraud and manipulation, and lacking comprehensive federal oversight, crashed and helped drag the economy down with it. Congress responded with the Securities Act of 1933 and the Securities Exchange Act of 1934, creating the S.E.C. Critics denounced the legislation as socialism. Congressman Fred Britten complained that “the real object” of the 1934 law “is to Russianize everything.” But the republic survived and American capital markets went on to finance the American century under the very rules Mr. Atkins now portrays as shackles.

Mr. Atkins wants the founders to bless a world in which public power retreats and private financial power is presumed innocent. The actual founding will not cooperate. Jefferson feared a monied aristocracy, Madison feared faction, and Smith accepted restraints on banking when private liberty endangered society.

The S.E.C. was created to restore confidence in financial markets after their collapse had helped make socialism politically attractive. Well-regulated markets produce trust. Trust attracts investment, and broadly shared prosperity remains among the strongest defenses against political extremism. Markets retain their legitimacy only when the public believes the rules apply equally to everyone. An S.E.C. chairman who retreats from enforcing the securities laws against a politically connected industry tells ordinary Americans that wealth and influence purchase different rules. Once that belief takes hold, confidence in markets erodes, and critics of capitalism scarcely need to make their own case.

Lee Reiners is a lecturing fellow at Duke University