The Bernard Madoff scandal is not only another blow to trust and confidence on Wall Street, but another knock on the reputation of the Securities and Exchange Commission — supposedly the cop on the financial-markets beat.
Earlier this year, SEC Chairman Christopher Cox famously said Bear Stearns was in reasonably good shape three days before the firm went belly-up.
Now Cox has blasted his career regulators for failing to unearth the alleged $50 billion Ponzi scheme that Madoff is accused of running with his investment firm, Bernard L. Madoff Investment Securities LLC.
Remarkably, the Madoff operation had been subjected to several SEC inquiries over the years, most recently in 2007.
But Cox, in a blistering rebuke of his own staffers, says they never sought a formal commission-endorsed investigation, which — given the SEC’s power of subpoena — would have forced Madoff to produce critical information about his operation.
Officials say Madoff kept more than one set of books.
Another wrinkle emerged in a Wall Street Journal report that former SEC lawyer Eric Swanson married Madoff’s niece, Shana, in 2007. Swanson, according to an SEC statement, was a member of the agency’s team that examined Madoff’s brokerage twice.
The revelation prompted the SEC’s inspector general’s office to say it planned an examination of the relationship.
The signs of rot in Madoff’s brokerage operation seem obvious in retrospect, especially the steadily increasing returns he posted in bad years as well as good ones. In addition, the auditing firm engaged to keep the books was unusually small for a business with billions under investment.
Madoff’s client list included many prominent wealthy figures such as Jeffrey Katzenberg, chief executive of DreamWorks Animation, along with charities, Swiss banks, billionaires and affluent retirees. Several charities and at least two foundations have been forced to close because of losses.
Investigators are still trying to piece together exactly how Madoff ran his alleged scam.
Obviously something is amiss with the SEC, which is now a ripe subject for a congressional inquiry with a view toward strengthening the agency. If Madoff’s operation had been uncovered earlier, a great deal of heartache and financial loss could have been avoided.
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I think it's the fact that
I think it's the fact that most of us and those we deal with are honest, so we trust. Our trust makes it easy for the bad actors to take advantage of us. Then there's the herd mentality, if so many important people are giving Madoff their money he must be OK. There were a lot af big institutions and smart people trusting him.
People just look at their statements for a net gain and so long as it's there they don't ask questions. If there no gain they try not to look at all like my IRA now. Perhaps this will teach us a lesson but not for long. Joyeux Noel!
If we don't protect the freedom of speech how will we know who the idiots are?
Radical.... Merry Christmas
Radical.... Merry Christmas to you too...
I still think the lack of personal due diligence is at least PART of the problem. An article yesterday in the WSJ detailed how anyone looking at the monthly statements this crook put out would have known the trades were impossible to have been made. He also showed gains in options trading in a falling market, rarely possible.
I know the SEC has some blame, but personal greed IMO was still the major factor. This cannot be legislated or regulated out of existence until we learn much more about genes..
Absolutely personal
Absolutely personal responsibility. Madoff will go to jail for the rest of his life but that will be cold comfort for the investors. Apparently there was evidence of his wrongdoing for years and years and somebody looked the other way. There's a difference between a free market and anarchy. If nobody's guarding the hen house the foxes will always come.
If we don't protect the freedom of speech how will we know who the idiots are?
Right. It's all
Right. It's all Bush/Cheny/The Sec's fault. The person who committed the crime had nothing to do with it. Geez, how about a little personal responsibility.
This is going to hurt us
This is going to hurt us beyond the immediate losses to investors. Between our inept subprime loans fiasco and outright criminal fraud the world has lost confidence in the US banking/investment system. Their money will go elsewhere into safer investments e.g. baseball cards or Hummel figurines, maybe beenie baby futures
If we don't protect the freedom of speech how will we know who the idiots are?
Jim is correct. The Bush
Jim is correct. The Bush administration (throw shoe here) de-regulated Wall Street. The SEC didn't do its job because the folks in charge didn't want it to. It was one big party for the connected. I guarantee that administration apologists will take the line "you see government doesn't work." The S&L lessons weren't learned, the internet bubble lessons weren't learned, the Enron lessons weren't learned.... probably should just fail the class and move on.
The investors were not, IMO,
The investors were not, IMO, blameless in this fiasco.... There are 2 old sayings which come to mind:
1. if it looks too good to be true, it probably isn't
2. if you reach for yield be prepared to pay with lost quality
These investors were in a dream world getting 10% return CONSISTENTLY. Should have done a good due diligence IMO, they didn't, and later found out the guys a friggin crook....
Please. Your hero GWB got
Please. Your hero GWB got exactly what he wanted when he put Cox in charge. Minimalist regulation and starving the regulatory agencies of funds to enforce rules was the rule of the day under the Bush administration that you worship, Mr. McClanahan.