What will it take for SEC to regulate?
The SEC is accused of dropping the ball with Madoff. Now there are allegations that Robert Allen Stanford scammed investors out of $8 billion. What does someone have to do to get the watchdog commission's attention? Ronni Radbill reports.
Seal of the US Securities and Exchange Commission (Getty Images)
More on America's Financial Crisis
TEXT OF STORY
Tess Vigeland: You know things are bad on Wall Street when the guy picked to police it has a history of chasing down terrorists. Robert Khuzami was named the new enforcement chief of the Securities and Exchange Commission today. He's a former New York federal prosecutor who's gone after white-collar criminals as well as evil-doers. One hopes he might first head off in hot pursuit of the nation's Ponzi schemers.
First, the SEC failed to catch on to Bernie Madoff. And now, Allen Stanford. Stanford is suspected of what authorities are calling a "massive fraud" at his Carribean-based banking group. Today the FBI found him in Virginia. So for not-the-first time, you have to wonder what it takes to get the SEC's attention? Ronni Radbill reports from Washington.
RONNI RADBILL: To find out how bad an offender has to be, I thought who better to ask than the man who used to run the SEC, former chair Harvey Pitt.
HARVEY PITT: It's not a question of how bad it has to be, it's what evidence they are capable of finding.
And that evidence doesn't come easy. He says the agency gets tips from public informants and does its own research. But insiders say the agency is chronically understaffed and underfunded.
Kathleen Hamm is a former Assistant Director at the SEC's enforcement division.
KATHLEEN HAMM: It's very manually intensive and takes a lot of effort especially if someone is intent on deceiving not only investors but the SEC and their investigators.
Fewer than 4,000 people work at the SEC, a tiny police force to patrol a financial says policing a financial system as large and complex as America's.
Hal Scott's a professor at Harvard Law School. He says a bigger problem is a lack of understanding at the SEC of the markets its required to police.
HAL SCOTT: The SEC has traditionally been an agency of lawyers. And unfortunately for our profession, lawyers aren't always the most financially literate people.
Scott says that lack of knowledge means the SEC often doesn't fully understand how the investment advisory business works. That means, the agency is ill-equipped to identify possible Ponzi schemes even when the red flags show up.
But he says, and Kathleen Hamm agrees, the SEC would be a lot better at chasing down fraudsters if it had a lot more money and more and better resources.
In Washington, I'm Ronni Radbill for Marketplace.
Comments
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From Renton, WA, 02/20/2009
How surprising is it that the SEC is "understaffed and underfunded" after eight years of an administration that didn't believe in the SEC's mission?
From Carmichael, CA, 02/20/2009
"white collar criminals as well as evil-doers"--this caught my attention as well. I'm appalled and disgusted with the white collar schemers too, but never with Tess, who rocks!!
From Orono, ME, 02/19/2009
I am stunned:
Tess Vigeland: "...who's gone after white-collar criminals as well as evil-doers."
?? So the scum-bags who ran Eron, MCI, Health South, etc into the ground, the Ponzi-schemers, and their ilk - i.e. people who have devastated millions of hard working honest folks, in fact, precipitated this 'Economic Crisis' - are NOT EVIL??
I am appalled - and disgusted.
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