The SEC has been accused of being flat-footed on the issue of short selling. The impression among the media and some politicians is that the agency has failed its charter to be the primary watchdog over markets on a number of occasions. John McCain even said he would fire Christopher Cox, the SEC chairman.
Adding to the disdain is a report from inside the SEC itself issued by the agency's monitor of internal controls. According to The Wall Street Journal (subscription required), "Inspector General David Kotz said it is 'undisputable' that the SEC 'failed to carry out its mission in its oversight of Bear Stearns.'" Kotz says the SEC was aware of the threats posed by subprime mortgages and did nothing.
The news adds to the perception that if the federal government had been on top of the credit crisis beginning in early 2007, a number of large banks and brokerage firms would not have failed or watched their shares lose 80% of their value. Based on this point of view, the government is liable for hundreds of billion of dollars loses suffered by common shareholders and bond holders.
Private enterprises rarely have any success suing government agencies. in many ways that is a practical way to keep the courts from being overwhelmed by people with grievances against federal authorities. But, the inspector general's comments do say that investors in the firms which failed were not fools. They simply never had the benefit of assistance from the one agency which should have protected them.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-27-2008 @ 9:07AM
MeggaWhats said...
Should be the middle finger.
9-27-2008 @ 9:28AM
Tom M. said...
Should be the middle finger of both hands , and your middle toes if physically possible.
9-27-2008 @ 9:38AM
DaveF said...
If the SEC had such a major breakdown, it simply is not plausible for the FED under Greenspan to remain blameless for the financial crisis.
Remember the first initial disruption ocurred during the 2000 elections where Enron and Texas based utility companies manipulated the market for energy in California. Capital investment dried up nearly over night as fixed costs for companies escalated. 7 trillion dollars of equity disappeared as there were massive bankruptcies of small firms and callapse of utility share prices. Greenspan acted to stimulate the economy by lowering rates. The only two components of economic growth was consumers and housing. Like a bad second coming of the guns and butter policies during the Vietnam war. In order to avoid recessionary pressures by increasing taxes to pay for the planned war in Iraq, deficit spending and off budget financing under Bush became the norm. Add crony capitalism and no bid contracts to award political allies you had no incentive to control spending. McCain is right he did mention wasteful spending and then did nothing to control it, by voting for it.
9-27-2008 @ 1:01PM
william lindblad said...
Beijing curbed mortgage lending in 2003 and 2006 to keep debt manageable amid a real estate boom, while American regulators responded to a similar situation by letting credit grow, said Liu Mingkang, chairman of the Chinese Banking Regulatory Commission.
(taken from AOL financial news 9/27/08)
The Chinese know who is responsible for our entire mess and the above article should be read in it's entirety.
The except above is the statement of the head of their banking control, and while he does not mention any specifics - I will.
Our counter parts to this function are the House and Senate banking and finance committees and the Federal Reserve.
Remember this on election day.