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SEC: CoxSlackers & BushWackers Fiddled While Wall Street Burned

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The big outrage de jour making the rounds in the media currently is the porn scandal at the Securities and Exchange Commission (SEC). This report from the Washington Post is typical of the reporting coming out of the main media:

Republicans are stepping up their criticism of the Securities and Exchange Commission following reports that senior agency staffers spent hours surfing pornographic websites on government-issued computers while they were supposed to be policing the nation’s financial system.

California Rep. Darrell Issa, the top Republican on the House Oversight and Government Reform Committee, said it was “disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation’s economy on the brink of collapse.”

He said in a statement Thursday that SEC officials “were preoccupied with other distractions” when they should have been overseeing the growing problems in the financial system.

Would it be too much for the media to actually think for a moment before they perform stenography for alarmist Darrell Issa? Because even a moment’s pause would yield the realization that Republican outrage on this is absurd and duplicitous. In fact the SEC – IG report produced for another of the Republican howlers, Iowa Senator Charles Grassley, proves the pornification of the SEC was born and grown during the Bush/Cheney Administration and the leadership of Republican stalwart and longtime Issa colleague and friend Chris Cox. The IG Report also demonstrates quite clearly that the vast majority of the incidents occurred during Cox’s reign during the second Bush term, although there were some that continued on during the Obama Administration.

But it is not just that the problem was born and matured under Bush and Cox, it is the fact that it is symptomatic for the emasculation and gutting of the SEC which occurred at their hands and express direction. It was not a bug, but a feature. As Bloomberg News reported last year:

Under former SEC Chairman Christopher Cox, the agency instituted policies that slowed cases and led enforcement-unit lawyers to conclude commissioners opposed fining companies, the Government Accountability Office said in a report today. An unidentified attorney said it was “widely felt” commissioners prevented the division from “doing its job,” according to the report.

“Some investigative attorneys came to see the commission as less of an ally in bringing enforcement actions and more of a barrier,” the GAO said. Cox’s policies “contributed to an adversarial relationship between enforcement and the commission.”

The non-partisan GAO report on the Bush/Cox SEC found poor management, determination to not pursue cases, lack of transparency, and collusion with business interests. It was the Republican philosophy and direction which neutered the SEC. It is little wonder they took to surfing the net for porn, they literally had nothing else to do under Republican “leadership”.

So perhaps the media stenographers ought to remember this when suddenly howling duplicitous Republican shills like Issa and Grassley want to tar, feather and undermine the SEC now that Democratic leadership, led by Mary Schapiro, have cleaned the agency up, turned it around and put it back to work doing its oversight and enforcement job.

On a related note in things financial, our friend Selise is going to be along in comments to discuss her Seminal Diary on financial reform and the commendable Fiscal Sustainability Conference and Teach-In occurring next week in Washington DC. This is a worthy effort and is supported by a variety of progressive interests including Jamie Galbraith and my friend and former colleague, Ian Welsh.

(graphic by nathan bransford)

Comings and Goings and Dealings at the SEC

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Last Wednesday, Linda Thomsen was one of a handful of contemptuous SEC officials who appeared before Congress–and pretty much refused to answer any questions. That same day, new SEC head Mary Schapiro sent a very contrite letter to Paul Kajorski, admitting, "Today’s hearing before your Subcommittee cannot have been satisfactory for you." Schapiro offered to meet at Kanjorski’s earliest convenience so, "we can determine a course forward." On Friday, Schapiro got rid of rules that GOP hack Chris Cox and his predecessor had put into place that made it hard to impose financial penalties on companies.

Securities and Exchange Commission chairman Mary Schapiro announced Friday she would make it easier for SEC staff to launch formal investigations of corporations, and she overturned her predecessor’s policy of requiring commission approval for levying financial penalties against public companies.

The latter move, in particular, represents a rebuke to her predecessor, Christopher Cox, and to former SEC commissioner Paul Atkins.

[snip]

Schapiro said the enforcement staff had told her the pilot program had "introduced significant delays into the process of bringing a corporate penalty case; discouraged staff from arguing for a penalty in a case that might deserve a penalty; and sometimes resulted in reductions in the size of penalties imposed." 

Schapiro also said it was too difficult for enforcement staff to launch a formal investigation, which currently also requires permission from the SEC.

In undoubtedly related news, Linda Thomsen will announce her resignation today.

The U.S. Securities and Exchange Commission’s top enforcement official, Linda Thomsen, is expected to resign on Monday, CNBC television said.

[snip]

The enforcement division has been heavily criticized for how it handled the Bernard Madoff case, in which the former financier is accused of defrauding investors of $50 billion.

And in other, probably related news, the SEC has decided that Madoff will be held civilly, as well as criminally, liable for his deeds.

The Securities and Exchange Commission says it has agreed with Bernard Madoff on a deal that could eventually force the disgraced money manager to pay a civil fine and return money raised from investors.

The agency said Monday the agreement states that Madoff cannot contest allegations of civil fraud and that possible penalties will be decided "at a later time."

I look forward to seeing whether this civil fraud deal reflects the earlier contemptuous approach of Linda Thomsen, or whether it reflects the new responsive era of Mary Schapiro.