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NY Times Tries To Get In Front Of The GAO's Harsh SEC Report
Location: Blogs Bob O'Brien's Sanity Check Blog
Posted by: bobo 12/16/2007 6:25 PM
The NY Times has an interesting piece about a new GAO report to be released, which essentially says that the SEC doesn't do its job WRT investigations of criminal wrongdoing by Wall Street.
The best lines in the article are, "The bad news is that these regulatory lapses seem so basic that it is hard to believe no one at the S.E.C. has resolved them by now. The good news is, because they are so basic, they can be fixed promptly.
And if they aren’t? Call it one more data point for those who increasingly wonder whose side the S.E.C. is on."
It is also hard to believe that the SEC can't seem to grasp that healthy markets require timely delivery of the products purchased. That can also be fixed promptly - no money trades until the stock is delivered. But again, the SEC, unlike the entire rest of the frigging planet, can't seem to put 2 and 2 together on that and make 4, even though section 17 of the 34 Act spells it out as clearly as can be.
When trying to understand the SEC, I would suggest that a paradigm shift is in order. My conclusion is that the SEC was never intended to regulate the markets effectively, but was rather a PR move by Wall Street after the Pecora hearings had the entire country ready to lynch the bankers. So a regulator without criminal prosecution capacity was created, whose first head was one of the worst crooks ever seen in the markets, and which is now seemingly incapable of doing even the simplest things right. Oh, sure, they're great when Wall Street wants a threatening pretender to the throne taken down, a la Milken, or needs to hand out wrist slaps to maintain the pretense that they are regulating, but the Aguirre matter, the SEC's treatment of naked short selling - for years - and now this report, only make sense when viewed through the appropriate lens.
Wall Street needs rubes to keep sinking their savings into the market. Wall Street doesn't want any sort of meaningful regulation, certainly not of the top tier firms that own the majority of the biz. Hence, Wall Street needs an agency that makes lots of noise, but is completely ineffective. They got it. That also explains why none of the major market scandals of the last few decades were unearthed by the SEC - they were only brought into the mix once it became obvious that the uglies were going to become known, so best to limit the exposure by having a friendly group running the proceedings.
Which brings us to now. An agency that continually makes the worst possible decisions for investors, which lacks even rudimentary competence, and which can be found obstructing justice, ignoring it's own rules, and giving hall passes to the larger offenders. That is the true lay of the land. Everything else is smoke and mirrors. The cops are bent, and the money behind the powers that be has structured the Commission to be as ineffective as imaginable, so Wall Street can continue to run the show as it likes.
No real surprise or confusion, if one views events through that lens. At this point, I would argue that any other interpretation insults our intelligence.
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