Lack of SEC oversight and enforcement at the center of too many messes

Posted by: Aaron Pressman on December 17, 2008

Once again, the Securities and Exchange Commission is apologizing for failing to do its job. This time it’s the agency admitting that it had credible allegations of wrongdoing at Bernie Madoff’s firm starting in the 1990s and continuing for years and years that were never properly investigated. Now, $50 billion of alleged losses later, it’s way too late for apologies.

If you stop and think about it, the SEC failed to do its job at almost every level of the current mess we’re in. Who allowed Wall Street firms to increase their leverage to 30 and 40 times their capital and endanger the entire financial system? Why, the SEC. And who was supposed to be regulating the rating agencies and policing them for conflicts of interest as they signed off on trillions of dollars of toxic mortgage-backed securities? Again, the SEC. When it turned out that Wall Street had rigged the entire $300 billion auction rate securities market, who was then regulator that investigated but did virtually nothing until after it was too late? Right again, the SEC. And when Bear Stearns was running a couple of over-leveraged, mislabeled, highly-risky hedge funds, which regulator’s inspector general said it had failed to act in time? Yep, the SEC. Finally, which agency had an inside view of the risk management procedures at all the big firms but never asked any tought questions? Right again, SEC.

It’s true — there are plenty of other actors here who screwed up, including but not limited to banking regulators, Congress, various White House crews, nefarious mortgage brokers and on and on. But the SEC was in a position to stop almost all of the bad stuff that’s happened and failed to stop any of it.

Perhaps the whole mess is best summed up by this simple Twitter message from publisher Rex Hammock: Headline you won’t see: ‘SEC Chairman admits his staff was too busy busting Martha Stewart to investigate Madoff’
What do you think?

Reader Comments

Christopher Holland

December 18, 2008 6:44 PM

Bernard Madoff runs a huge scam for years and ruins the lives of a mess of people. When caught, he gets told to live in his uptown apartment and obey a curfew! Not even a hint of jail time!You tell me what regulator is going to bother finding corporate crooks when this is how some donkey of a judge views the largest embezzlement in history. The guy who wrote that the law is an ass was an incurable optimist, he didn't come close to the truth. And who in their right mind is going to give Wall Street even a brass razoo to manage when this is how monster frauds are treated, even when they are eventually caught.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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