Voluntary Corruption

by digby

I know this will come as a huge surprise to you:

A new government audit suggests the Securities and Exchange Commission (SEC) effectively dropped the ball in overseeing a voluntary program to keep an eye on the troubled Bear Stearns and other massive investment banks. Government auditors found “serious deficiencies” in SEC oversight of Bear Stearns prior to its collapse in March. The Inspector General of the SEC also found that in some cases, Bear Stearns did not comply “with the spirit” of the voluntary program designed to oversee it.

Leading up to its collapse, Bear Stearns was participating along with other major investment banks in a “voluntary” oversight program begun in 2004 designed to consolidate supervision. The idea was that voluntary regulation of these banks was the only way to effectively govern their behavior because of the peculiar complexity and their international structures.

In Bear Stearns’ case, however, auditors found the company failed to comply with a number of the voluntary rules before its collapse, and that the SEC did little or nothing to pressure Bear Stearns into compliance.

I can’t imagine how something like that could happen, can you? Who could have expected that voluntary regulations wouldn’t work? Shocking.

The good news is that the people who have been in charge are mad as hell and they aren’t going to take it anymore:

SEC Chairman Christopher Cox responded to the report announcing the immediate end of the voluntary program. In a written statement, he said “The last six months have made it abundantly clear that voluntary regulation does not work.” The voluntary “program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily,” Cox said.

That’s quite an insight.

The one thing McCain has gotten right is that he’s called for the firing of that guy. Not that it would solve anything, but it needs to be done anyway. This corrupt toady had no business being anywhere near the SEC.

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