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The SEC's Memory Hole
August 18, 2011 12:24 AM   Subscribe

Is the SEC Covering Up Wall Street Crimes? "A whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals."
posted by homunculus (45 comments total) 25 users marked this as a favorite

 
So, who wants to design a system that will be more efficient than the current one at the task of crumbling a superpower?

'Cos it seems to me that while it might take some thinking to design a system that works better than what we've got, it's gotta be easy to do that compared to the mind-warping challenge of designing a system more stagnant, seized, corrupt, and self-destructive than the current one.
posted by -harlequin- at 12:48 AM on August 18, 2011 [3 favorites]


If only Rube Goldberg were still alive!
posted by TwelveTwo at 12:49 AM on August 18, 2011


It is common for S.E.C. employees to leave the agency for the private sector and then begin representing clients before the agency. Mr. Flynn contends that the practice increases the likelihood that S.E.C. investigators could do undetected favors for former colleagues and their clients by quashing investigations. -- From today's NYT.

In the US, working for a federal agency is not viewed as public service, but a stepping stone to a better financial package at an investment bank, law firm, and now hedge/PE fund. So long as the revolving door between government agencies and the private sector is in place, then such abuses will be rampant and an increasingly plutocratic society will result.

There should be a 'non-compete' rule that if you work as a public servant, for two years after you leave, you may not work in a private sector company whose business is or could be regulated by the federal or state agency where you served.
posted by Azaadistani at 1:05 AM on August 18, 2011 [20 favorites]


There should be a 'non-compete' rule that if you work as a public servant, for two years after you leave, you may not work in a private sector company whose business is or could be regulated by the federal or state agency where you served.

So no changes for the SEC, then?

The whistleblower's claims of willful destruction of evidence have already attracted the attention of the Senate Judiciary Committee.
posted by kithrater at 1:11 AM on August 18, 2011


None of this should really come as a surprise, given that the SEC under Obama has been run by Clinton's veteran deregulator Mary Schapiro, a person who believes that most financial regulation is "too burdensome" and "stifles financial innovation." After spending the Clinton years "regulating" as chair of the CFTC, she spent the Bush administration on the board of Duke Energy and Kraft Foods, as well as working for the self-regulating non-governmental organization FINRA where she earned a compensation package as large as Lloyd Blankfein's. I mean c'mon, at FINRA she appointed Bernie Madoff's son as a compliance officer, and yet this is who Obama decided was the right person for the top job at the SEC, as he entered the White House at the height of the worst financial crisis in a generation. Christ, what an asshole.

A recent study by the Project on Government Oversight found that over the past five years, former SEC personnel filed 789 notices disclosing their intent to represent outside companies before the agency – sometimes within days of their having left the SEC.

A double-whammy: Bush freezes the SEC's budget in 2005, forcing them to shed 10% of their staff. Everyone gets scooped up by the banks, works a couple years defending them in court, and then are given their old jobs back in 2009 by Schapiro. Talk about a revolving door; this is how a bad regulator gets even worse.
posted by mek at 1:11 AM on August 18, 2011 [19 favorites]


Bush freezes the SEC's budget in 2005, forcing them to shed 10% of their staff. Everyone gets scooped up by the banks, works a couple years defending them in court, and then are given their old jobs back in 2009 by Schapiro. Talk about a revolving door; this is how a bad regulator gets even worse.

Change that corporate thieves can believe in. Wait....
posted by Vibrissae at 1:39 AM on August 18, 2011


Yes.
posted by ShutterBun at 2:43 AM on August 18, 2011


The SEC is a regulatory agency that is 100% captured by its industry.
It is a joke. The only hope for Wall St reform is the Justice Dept.
posted by Flood at 3:07 AM on August 18, 2011 [5 favorites]


See Regulatory Capture. Government has become a tool of the financial services industry, plain and simple.
posted by tgrundke at 3:28 AM on August 18, 2011 [4 favorites]


You just don't understand, Obama has to enable these robber barons because the votes just aren't there on the left.
posted by CautionToTheWind at 3:30 AM on August 18, 2011 [15 favorites]


So wait, let me see if I have this right...

An agency founded by a career criminal, chosen for his success in what today we'd call (a variety of) securities fraud (not to mention large scale bootlegging during prohibition), has a culture of protecting the real criminals?

Whodathunkit?

/And for my next trick, I'll game the US electoral college to "win" the presidency, the use my powers for good by building delicate new democracies in the Middle East!
posted by pla at 3:32 AM on August 18, 2011


I've always assumed that this was just what the SEC was for.
posted by Faint of Butt at 3:35 AM on August 18, 2011 [1 favorite]


I'm really amazed that there are so few journalists producing incisive journalism. In my opinion, Colbert, Stewart and Taibbi are some of the few that really stand out (and two of them aren't even journalists!).
posted by a womble is an active kind of sloth at 3:49 AM on August 18, 2011 [2 favorites]


The whistleblower's claims of willful destruction of evidence have already attracted the attention of the Senate Judiciary Committee.

I foresee a massive increase in Wall Street campaign contributions to Senator Grassley and the other members of that committee.
posted by Kirth Gerson at 4:15 AM on August 18, 2011 [1 favorite]


There should be a 'non-compete' rule that if you work as a public servant, for two years after you leaveever, you may not work in a private sector company whose business is or could be regulated by the federal or state agency where you served and vice versa.

FTFT
posted by DU at 4:19 AM on August 18, 2011 [2 favorites]


I'm really amazed that there are so few journalists producing incisive journalism.

Where have you been? Corporate employees are severely discouraged from rocking the boat. If they haven't already, I expect the corporate owners of the MSM will soon require all reporters to sign non-disclosure agreements prohibiting the release of any information embarrassing to Big Business.
posted by Kirth Gerson at 4:19 AM on August 18, 2011


I'm fast coming to the conclusion that we have entered the final push by corporate America to dismantle the US government, save for its military power.
~Removes foil hat.
posted by Thorzdad at 4:22 AM on August 18, 2011 [1 favorite]


Final push? This is the third curtain call after the second encore; at this point they're just trotting out on stage again for the lulz.
posted by seanmpuckett at 4:41 AM on August 18, 2011 [2 favorites]


Given the total failure of the Justice Department, the FBI and others to stop or reduce a fully illegal but profitable business in the drug trade how does anyone seriously expect the SEC to make a dint in dodgy dealings in what is mostly a legal business but one that makes the drug trade look like a non-profit industry?
posted by sien at 4:47 AM on August 18, 2011 [2 favorites]


And here I thought the SEC was busy trying to decide if they were going to take in A&M.
posted by kmz at 6:00 AM on August 18, 2011 [2 favorites]


Thorzdad: "I'm fast coming to the conclusion that we have entered the final push by corporate America to dismantle the US government, save for its military power. "

Agreed. It's taken them 78 years, but they're finally closing in on it.
posted by ob1quixote at 6:05 AM on August 18, 2011 [4 favorites]



There should be a 'non-compete' rule that if you work as a public servant, for two years after you leaveever, you may not work in a private sector company whose business is or could be regulated by the federal or state agency where you served and vice versa.


Who do you expect to properly regulate a highly sophisticated and weasely business like finance without actual experience in, you know, that industry? Seems to me you would want ex-industry people who, after actual, proper, rigorous vetting, are found to have integrity and belief in regulation. Going the other direction, yes..fuck the industry, they can afford to pay to train people on how to weasel through regulation.
posted by spicynuts at 6:48 AM on August 18, 2011 [2 favorites]


Ya think?
posted by stormpooper at 6:58 AM on August 18, 2011


Final push? This is the third curtain call after the second encore; at this point they're just trotting out on stage again for the lulz.

This. Worst part? We voted for this shit for the last 30 years, pretty much regardless of who we voted for.
posted by Rykey at 7:05 AM on August 18, 2011


This "fence-hopping" seems to keep popping up whenever someone looks into large governmental problems. Congresspeople become lobbyists and regulators become private hired-guns. Surely the SEC would have a handle on trading with insider information - why is this any different?

I hold out zero hope of ever making any changes for the good if we are willing to allow this blatantly right-in-front-of-our-faces criminality to continue. (Records are routinely destroyed in direct contravention of law and no heads roll? Really?)
posted by Benny Andajetz at 7:05 AM on August 18, 2011


"By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation..."

I always wondered how on earth the CEO of Whole Foods got away with posting to Yahoo investment forums, talking down the stock of Wild Oats and trying to lower their price, shortly before his company bought them at a nice discount. From any real perspective, it was a no-brainer. The posts that everyone and his dog knew he made were right there for anyone to see!

...well, now I know.
posted by markkraft at 8:03 AM on August 18, 2011 [1 favorite]


This is my surprised face.
posted by caution live frogs at 8:12 AM on August 18, 2011


The argument constantly trotted out is that they NEED to be able to offer the ability to get post-tenure private sector jobs to civil servants or they'll never attract the really good people.

Of course, only a moment's consideration would recognize that the only people this policy really attracts are people who are explicitly interested in joining the civil service knowing they'll get a cushy job in the private world later. In other words, people who want to get leverage on one side of the fence so when they go to the other side they can wink and nod and flash a think yellow envelope ... and get a really, really, really generous package.

Seems to me that if they made the policy "absolutely no one goes into civil service will ever get a private sector job in the same industry ever ever ever" then the people who would be attracted to the work would be the people who were sick and fucking tired of regulatory capture and wanted to do something about it.

But that will never happen, will it.
posted by seanmpuckett at 8:37 AM on August 18, 2011


The only hope for Wall St reform is the Justice Dept.

Unfortunately, the DOJ would rather let Wall St. police itself.
posted by homunculus at 9:03 AM on August 18, 2011


Alas, venting steam with carefully-crafted, intelligent, diligent, premonitory prose had no apparent effect during the Bush years, nor during the Bush-years continued. The rape rolls on.

Sometimes I suspect that these people figure that this is their last hurrah, that the consequences of AGW (restyled as "climate change" to protect tender ears from observation-based deductions) will pose such a threat to their privilege that there is no limit to the size of the bunkers and compounds they've planned that can assuage their apprehension.
posted by Twang at 9:09 AM on August 18, 2011 [2 favorites]




In other revolving door news: Goldman Sachs VP Changed His Name, Now Advances Goldman Lobbying Interests As Top Staffer To Darrell Issa

You couldn't make this shit up if you tried. Unfuckingbelievable.
posted by Benny Andajetz at 9:22 AM on August 18, 2011


In other revolving door news: Goldman Sachs VP Changed His Name, Now Advances Goldman Lobbying Interests As Top Staffer To Darrell Issa

If true, and in a perverse way I rather hope it is, I wonder how the fellow is being compensated, what promises were made to him. There's a private conversation I would love to have heard.
posted by IndigoJones at 11:27 AM on August 18, 2011


Here's some hopeful news, at least: Elizabeth Warren is officially running for the Senate seat held by Scott Brown.
posted by homunculus at 11:49 AM on August 18, 2011 [1 favorite]


Well damn, I may have to move to Massachusetts.
posted by IndigoJones at 5:25 PM on August 18, 2011


Matt Taibbi vs the SEC
posted by homunculus at 10:08 AM on August 20, 2011






Matt Taibbi on Democracy Now
posted by homunculus at 9:05 AM on August 23, 2011








Accounting is destiny
If we were serious about that, we would force banks to write down their loan portfolios aggressively, so that going forward shareholders and managers have nothing to lose by offering principal modifications when doing so would maximize the cash flow value of their loans. But if we did force banks to write their loan portfolios down aggressively, the shareholders and managers with nothing to lose would be different people than the current shareholders and managers of large banks, via some resolution process or restructuring. Which is much of why we didn't do that, when we had the chance, and why bank mismanagement of past loans continues to exert a drag on the real economy as we try and fail to go forward. This very minute, there are homeowners who are nervously hoarding cash, who are leaving factories idle and neighbors unemployed, in order to maximize the option value of the bank franchise to incumbent shareholders, managers, and uninsured creditors.
The global crisis of institutional legitimacy
It looks increasingly as though we're entering Phase 2 of the global crisis, with 2008-9 merely acting as the appetizer. In Phase 1, national and super-national treasuries and central banks managed to come to the rescue and stave off catastrophe. But in doing so, they weakened themselves to the point at which they're unable to rise to the occasion this time round. Our hearts want government to come through and save the economy. But our heads know that it's not going to happen. And that failure, in turn, is only going to further weaken institutional legitimacy across the US and the world. It's a vicious cycle, and I can't see how we’re going to break out of it.
cf. The Global Crisis of SOME Institutional Legitimacy & Can Distrust Bear Fruit?
posted by kliuless at 2:24 PM on September 1, 2011 [1 favorite]


One Way to Fix the SEC
posted by homunculus at 2:34 PM on September 1, 2011 [1 favorite]


We thought we were wealthier than we were? Who are this 'we' of which you speak, Tyler Cowen?
The 'overestimate' of wealth from which we are now suffering occurred first as an exaggeration of value within the core financial system and then as a willingness of institutional investors to take values given by core financial intermediaries as durably sound. 'We' did not decide we were wealthier than we are. Two groups of people whose economic role is precisely to evaluate the quality of our wealth misjudged, one directly by neglecting risk, the other indirectly by trusting the first when it should have known better. The broad public or taxpayers or the polity erred only and precisely by trusting these professionals... 'Mistake' is not a remotely sufficient characterization of what occurred. There were discernible incentives behind the banking sector's misbehavior... We should attend very carefully to the details of how we came to think what we thought, of who told us we were wealthy when we weren't. (Shades of Galbraith...) More importantly, if we cannot evaluate the quality of our wealth going forward, we are unlikely to make decisions conducive to sustaining and expanding that wealth... 'Our' misjudgments were not some random perturbation spiraled out of control. They were the result of a set of arrangements that systematically bribed gatekeepers to make and accept incautious estimates, and to circumvent control systems intended to keep valuations in check. As of this writing, those arrangements remain largely in place.
The Great Splintering
There are many kinds of looting... The bedrock of an enlightened social contract is, crudely, that rent-seeking is punished, and creating enduring, lasting, shared wealth is rewarded and that those who seek to profit by extraction are chastened rather than lauded... What happens when a nation willfully ignores perhaps the most fundamental lesson of economics, and hopes rent-seeking will equal real prosperity? ... the problems of youth unemployment, underemployment, marginalization, and inequality are so pervasive globally, more and more economists are beginning to point to a lost generation... Our institutions are failing... I call it a Great Splintering — not purely an economic phenomenon... an era when social contracts are being torn up, abrogated, betrayed, abandoned, by accident, by design, by 'regulatory capture,' or simply by polities too gridlocked to progress. Broken social contracts aren't just tidy abstractions, empty of visibly real consequences, disconnected from the noise and clamor of our messy human lives. As they break, yesterday's ways of living, working, and playing rupture; yesterday's organizations, from corporations to banks to nations, creak and crack... For many years now, societies have been limping on with broken institutions and splintered social contracts — right into the heart of this perfect storm. And I'd bet most of us have assumed that we'll continue to 'get by' ... the upheavals we're seeing now are stark evidence that the status quo's faith-based modus operandi hasn't worked — and isn't working.
also btw...

The bounds of monetary policy on Planet Earth - "Macroeconomic policy by fiscal expenditures directed to politically favored groups is awful, unfair, and corrosive of the body politic. Macroeconomic policy by asset swaps that are quietly mispriced is awful, unfair, and corrosive of the body politic... Under status quo policy stagnation, near-term macroeconomic risks are borne primarily by the poor and marginally employed. With demand-side stimulus, whether designed by Scott Sumner via the Fed or Matt Yglesias via the Treasury, those risks would shift to financial savers, who in aggregate hold the bulk of their portfolio in the form of fixed-income securities, and who also hold the testicles of members of Congress... The fiscal vs. monetary policy debate has gotten tiresome and distracting. If you think we need demand-side action, say specifically what you think we should do. If it's a helicopter drop, whether by Fed or Treasury, then we need new law. Push it, and tell the self-styled realists and pragmatists to fuck off... The Fed is not going to target NGDP or a price level path over any relevant time frame without a change in governance structure or mandate. People on the left and right and especially the technocratic center who like to see the Fed as a loophole through a dysfunctional Congress are kidding themselves. The Fed is a political creature, not some haven for philosopher-economists in togas who will openly consider your ideas. Get over it and get your hands dirty."

How Our Economy Was Overrun by Monsters and What to Do About It - "responsibility for this Great Stagnation lies with us... one of the most critical factors for the enduring prosperity of a nation isn't just what resources it's lucky enough to be endowed with, or how fiercely its companies are encouraged to compete: but also how complex, nuanced, and ultimately sophisticated its demand is... in which the people formerly known as 'consumers' carefully weigh the social, natural, and personal costs of the economic decisions... to make fundamentally wiser decisions."
posted by kliuless at 3:34 PM on September 1, 2011 [1 favorite]


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