U.S. Securities and Exchange Commission Chairman Christopher Cox’s regulators stood by as shrinking capital ratios and growing subprime holdings led to the collapse of Bear Stearns Cos., according to an unedited version of a study by the agency’s inspector general.
The report, by Inspector General H. David Kotz, was requested by Senator Charles Grassley to examine the role of regulators prior to the firm’s collapse in March. Before it was released to the public on Sept. 26, Kotz deleted 136 references, many detailing SEC memos, meetings or comments, at the request of the agency’s Division of Trading and Markets that oversees investment banks.
“People can judge for themselves, but it sure looks like the SEC didn’t want the public to know about the red flags it apparently ignored in allowing Bear Stearns and other investment banks to engage in excessively risky behavior,” the Iowa Republican said in an e-mailed statement.
Read it all. I find this really frustrating. When I hear all the talk of “more regulation” being needed, I worry about the poor record of the current SEC. In some cases, we do need more regulation, as for example the CDS market. But more than anything we need wiser regulation and better regulators–KSH.
Agreed, Kendall, and how about also some investment bankers with some common sense and an understanding of risk? Profit at the expense of bankruptcy makes little business sense.
Before writing off the current SEC, ask the pertinent questions: WHO was appointed to the SEC? (In many cases over the past 10 years, it was a case of neocon foxes guarding the henhouse); was the agency underfunded (a favorite way for neocons to kill off an agency they don’t care for: perpetually underfund and understaff it, then proclaim ‘they can’t do the job, let’s get rid of it entirely’); and WHO was lobbying/influencing the top managers of the agency? (Answer: More neocons, with their working philosophy of let the wealthiest insiders take the profit and let the little guy clean up any problems).
Don’t fall into the trap of condemning ‘regulation’ until you more thoroughly understand the recent history of strangled regulators!
Chairman Cox may well be getting too much blame. He was repeatedly hamstrung by two toxic ideologues, Paul Atkins and Cynthia Glassman.
I couldn’t agree with you more, and as one who has worked in central Government all her life (though not in the USA) can I also say that there is a limit to what regulation can achieve. Regulation can make people comply — it cannot make them “good” or “wise” or “prudent”.
It also can only set up barriers that make bad behaviour more difficult — but with the very real risk that these barriers then become hurdles that people try to overcome — like some perverse olympic track event.
Finally, regulation is very good at punishing people after the event — it is not so good at preventing them from doing beforehand.
You can make money in the stock market but you can lose it too and if you are not prepared to take a loss then you shouldn’t be in it!!