On Monday, I posted my opinion that people should be cautious in rushing to rebuke the Securities and Exchange Commission for any failures leading to the Madoff Ponzi scheme. Also on Monday, the New York Times engaged in such a rush. In today’s paper, the Times softens that stance. These views may have some bearing on whether the SEC survives, is dismantled or reconstituted in coming financial regulation reform.
My post said charges against the SEC for failure in the Madoff case should be looked into but that it was equally likely that the charges would prove incorrect. Above all, I opined that talk of SEC blame for the Ponzi scheme risks distracting from manifestly pressing matters of systemic significance arising in the general financial crisis.
In Monday’s Times Stephen Labaton painted a very unflattering piece on the SEC, emphasizing its alleged failures to interdict the Madoff scam, and quoting Chris Cox, current SEC Chair, as acknowleding some fault. The story, which ran on page B6 and spanned 876 words, called the Madoff episode the “latest black eye” for the SEC. It also mentioned the SEC’s failure to anticipate the problems at Bear Stearns, and cited SEC inspector general reports on “several major botched investigations” (although without noting that those reports have been contested by other SEC officials).
The Monday story also reported on other rumor-based and word of mouth complaints about morale among SEC staff, even assertions of a “hollowing out” of the agency under Bush administration directives.
In today’s paper, Mr. Labaton offers a different view.