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April 01, 2011 at 08:00 PM
The Securities and Exchange Commission’s reputation as a credible regulator may never fully recover from the Bernie Madoff Ponzi scheme. Granted, missing Madoff was a colossal blunder that cost investors dearly, and the agency should take extraordinary steps to ensure such a mistake is never repeated. But Congressional Republicans’ use of the Madoff fiasco—and now the latest turmoil involving ethical issues surrounding the SEC’s former general counsel, David Becker, and his ties to a Madoff account—as excuses to not award critical funds to the SEC is perplexing, if not downright frustrating.
Without a doubt, the real end game for Republicans’ continual bashing—and rehashing—of the SEC’s past mistakes is clear: they want to stop the Dodd-Frank Act in its tracks.
While Republicans have fought the Dodd-Frank Act since inception to eventual passage, lawmakers on both sides of the aisle have conceded that the current SEC chair, Mary Schapiro, inherited an agency with serious flaws. Even Schapiro was quick to remind lawmakers during a mid-March hearing held by the House Committee on Oversight and Government Reform regarding the SEC’s budget that she took the helm of an agency that was basically “in ruins.” In her defense, Schapiro told members of the Committee that she has “worked hard over the last two years to put this agency back on track.”
Schapiro went on to say that “it isn’t fair” to the SEC’s 3,800 employees when Congress targets specific issues—like, for instance, the SEC Inspector General report that found certain agency employees were viewing pornography during work hours—and then paints a picture that the entire agency is up to no good. “Most people there [at the SEC] are working their hearts out to do the right thing,” she said.
Pitt: Contrary to the Needs of Investors
Indeed, former SEC Chairman Harvey Pitt told me in mid-March that under its current leadership, “the SEC is doing thousands of things right every day.” Congress, he said, “must decide whether it wants the SEC to do all the things it has asked the SEC to do, or whether it simply enjoys criticizing the SEC and making it even more difficult for it to succeed.” Depriving the agency of necessary funding, he continued, “as a supposed punishment for alleged past failures is counter-intuitive, counter-productive and contrary to the needs of American investors.”
The enduring problem with the SEC: The agency is not self-funding, Pitt argues.
When asked by lawmakers during the House Oversight hearing what the agency would do with increased funding, Schapiro stated bluntly that more funding is needed “to transform the agency, and add the people we need so that we have a fighting chance to stay on top of what’s happening on Wall Street.”
Just days after Schapiro’s testimony, Sen. Tim Johnson, D-S.D, (lef), chairman of the Senate Banking Committee, released a statement saying that only a few years have passed since Ponzi schemes run by Bernie Madoff and Allen Stanford “were unearthed, and the economy is still reeling from risky bets made by Wall Street executives.” Given that the Wall Street reform passed by Congress last year via Dodd-Frank “gave the SEC and CFTC new authorities to protect investors and prevent future crises, it is reckless and irresponsible to gut funding for these critical new protections.”