One of the biggest items in the news right now is the financial regulation reform bill that is working it’s way through the Senate. The House has already passed it’s version, but the Senate has a much smaller margin of error, given the fact that the Republicans have threatened to filibuster the legislation. I have already discussed some of this, specifically the fallacy that the bill will set up a $50 billion rescue fund for large financial institutions, funded by the American taxpayer. That simply is not true, as I have already pointed out.
In the previous article, I pointed out what I felt was an obvious truth; one of the biggest reasons our financial sector went south in a hand basket was the fact that those who were in charge of regulating the industry failed to do their jobs. That fact is especially highlighted in a report from CNN this morning, a report that gives specific details about what some of the Securities and Exchange Commission employees were doing while the financial sector burned. Here is some of what we know happened.
As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, according to an agency report obtained by CNN.
“During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time,” said a summary of the investigation by the inspector general’s office.
More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.
One of my strongest arguments against the legislation in question is it’s creation of a new regulatory commission, a consumer protection bureau, that is supposed to regulate the very activities that brought our financial sector down. I have contended for a long time that a new agency is not needed, that the current agencies just need to do their jobs. I think it is safe to say that the report from the SEC and it’s Office of Inspector General (OIG) highlights that fact.
Should we make an assumption that any regulatory agency is any better than the people who staff it? I think not. The employees of the SEC were evidently secure in their jobs and in the knowledge that they could get away with pretty much anything they wanted, which included surfing Internet porn sites. They ignored what Bernard Madoff was up to, taking him at his own word that his scheme was legal and they had more important matters to attend to while our financial sector was sinking. Is it any wonder that the financial sector crashed as hard as it did? Much as Nero did while Rome burned, the SEC seems to have fiddled away it’s responsibility to the American people.
Agreed Larry! We don’t need yet another government agency, what we need is for the agencies that we already have to do their jobs. This is a perfect example. We should reform the existing agencies before we create new ones.
You’re comment made me think of something. The bottom line to all these regulatory agencies is the lack of accountability. Instead of holding people responsible for the decisions/actions, Obama and his ilk – politicians in general – just create new bureaucracies. It will become a lot hard to hold anyone accountable with all these new agencies.
Hmmmmm….
.-= Dominique´s last blog ..My butt? =-.
Now, now folks. They were making sure that the porn sites were not violating any regulations. We should applaud their commitment to fraud-free porn.
Excellent analysis Larry. We are all so quick to say regulate it more. At some point we regulate a thing so much it no longer is productive. In fact it becomes counterproductive. I agree we do not need another government bureaucracy to enforce rules and regulations that are already on the books. It’s like saying we need to reform the reformation. Anyway those are my rambling thoughts.
.-= John Carey´s last blog ..ACORN’s Bertha Lewis in her own words =-.
Well put, Larry, and I agree that, if we have a regulatory structure in place already, then make it productive.
I do continue, however, to question whether or not the SEC and the other powerful guides on Wall Street have the necessary objectivity to regulate within boundaries that are at once pourous enough for the markets’ success and strict enough to provide true protective measures. I have come to think of the SEC as the fox guarding the henhouse. So much of “regulatory moves” that we see coming from the SEC are backward-glancing, to clean up what’s already gone wrong. I don’t think that’s regulation that is productive, only measures that are reactive, and that doesn’t seem to be a good way to operate.
Does the leadership within the SEC truly have the ability to institute proper guidance tools that forward-think, protect investors as well as the profit that comes to Wall Street regardless of who’s winning or losing, and protect this volatile sector- and our country- from meltdown? To whom is the SEC most beholden: The overall health of the sector (a seeming “given”) or its breathern on Wall Street and the strong profits they seek? Is it possible that it is both? I have come to question that.
For the most part the people working for the SEC, the other financial regulatory agencies, and the securities ratings firms, and fairly smart guys who couldn’t land a position with a big Wall Street firm. The guys on Wall St dance circles around them and they can swarm the SEC with pressure and “suggestions” from a dozen major firms and dozens of second tier firms. The playing field is badly balanced against the regulators. An excuse? Certainly not. But the regulators also need to join forces instead of fighting a load of small battles at different agencies. Blend them together and give them a chance against the banks and financial firms.
There clearly needs to be greater regulation of derivatives. Whether that means trading them on open exchanges for 100% transparency or some less stringent environment is arguable but this can no longer be left to the industry to self-regulate. They had that chance and we all paid a HUGE price. A consumer financial protection unit, whether as a new agency or as part of an existing one, is also needed. Individual responsibility is a fine idea but why do we need to allow shady lenders to operate in the clear? Let the buyer beware should be the second line of defense not the first. Get rid of those crooks by regulating their activities and that goes for bank lending, credit card lending rates, pay check lending, etc. And finally, the $50 billion “bailout fund” — what a crock has been made over this thing. Dodd will drop it in a second once he thinks he’ll get Republican votes for doing so. But why should he right now? It’s a negotiating tactic pure and simple. I happen to think the idea is sound but I’m nuch more concerned about everything else. Get some GOP support, drop the fund, pass the bill, and let’s move on to immigration.