Finally some coverage of the Spitzer objections to the SEC settlement with Putnam:
from moneycentral.msn and (cough) Fleckenstein:
Empire statesman vs. Potomac watch-poodle
Turning to a potentially huge story that is still in its early chapters, we are seeing a serious battle developing between the SEC and New York State Attorney General Eliot Spitzer, a scandal-unearthing hero. He recently lambasted the watch-poodle for its partial settlement with Putnam, saying that the settlement was "enormously troubling," that the SEC "went behind my back," "that the SEC was oblivious to fund misconduct," and that "I'm not sure I can work with the SEC."
Then, this past Monday, Spitzer blasted the SEC in an op-ed piece in The New York Times called "Regulation Begins at Home." He certainly seems to have pretty valid arguments about the SEC. He does not strike me as a partisan hack, though I would not be surprised to see the mutual-fund uproar take its place in the upcoming election food fight. Under such circumstances, these things can acquire a life of their own and potentially affect market psychology. The issue bears watching even more when in the nation's paper of record, the New York State attorney general writes:
"Unfortunately, the SEC's deal with Putnam does not provide a satisfactory answer to these questions (about the refund of exorbitant fees and safeguards against future abuses). Instead, it raises new questions. The commission's first failure is one of oversight. The mutual fund investigation began when an informant approached our office with evidence of illegal trading practices. Tipsters also approached the commission, which is supposed to be the nation's primary securities markets regulator, but the commission simply did not act on the information. The commission's second failure was acting in haste to settle with Putnam, even though the investigation is barely 10 weeks old and is yielding new and important information each day."
SEC no evil
It sounds as though Spitzer believes there's more to be uncovered in the Putnam investigation, the nature of which might sully the SEC's credibility. If this turns out to be the case, and if he can argue convincingly that the SEC was trying to hasten closure so as not to roil the markets, then rest assured, investor psychology will be rattled. (That the SEC tried to make things run smoothly and do the bidding of the Investment Company Institute was suggested by a page-one story in the Nov. 16 New York Times titled "SEC's Oversight of Mutual Funds Is Said to Be Lax.")
Certainly, the ongoing Senate probe of the mutual fund industry will prove unsettling, notwithstanding all the other reasons to shake investor psychology.
What a decline will illuminate
Heretofore, the public has been willing to look the other way, to some degree, accepting business as usual on the part of corporate America, dead fish, or the mutual fund industry. The same obscene behavior that defined the mania has been given a wide berth. However, if the pervasive rot continues to build, and the SEC looks like it's not even serious about getting to the bottom of the scandals (much less catch them ahead of time), the perception of the whole industry could change radically. I intend to follow this bouncing ball carefully, because it could turn out to be a key component of a psychological change on the part of the public that will intensify when stock prices finally head down. |
