The Washington Post reports:
The Securities and Exchange Commission, which failed to stop Bernard Madoff’s long-running investment fraud despite repeated warnings, has disciplined eight agency employees over their handling of the matter but did not fire anyone.
The SEC’s head of human resources and a law firm hired to advise the agency had recommended that SEC Chairman Mary L. Schapiro fire one person, whom the SEC described as a manager in the office that inspects investment firms.
But the chairman decided not to fire the employee, because doing so “would harm the agency’s work,” SEC spokesman John Nester said.
The disclosure that no one was terminated comes at a time when street protesters and other critics who blame Wall Street for the country’s economic plight are questioning whether the government is serious about holding powerful wrongdoers accountable. This week, a federal judge excoriated the SEC for letting firms such as Citigroup settle fraud charges without admitting or denying wrongdoing.
In summary, Bernie Madoff operated, under the watchful gaze of the SEC, a Ponzi scheme that led to the largest financial fraud in U.S. history. To make amends for their failure to recognize and prevent such fraud, the SEC has disciplined seven people and fired none.
The punishments given the SEC employees varied and included suspensions, pay cuts and demotions.
The employee recommended for termination received one of the more severe penalties, a 30-day suspension along with a reduction in pay and grade. Another was given a pay cut of 5.7 percent. At the low end, one employee was suspended for seven days, another for three days and two others were issued counseling memos, a step below a reprimand.
Whether or not the SEC had to tools to prevent the reckless financial activities that led to the collapse of Lehman, or of Madoff’s Ponzi scheme, is a fair question. Whether or not they used the tools they did have available is also fair game, and here the SEC usually fails. Too often they have proven themselves either unwilling or unable to carry out their duties.
The SEC’s inspector general issued a 477-page report in 2009 concluding that the agency “received numerous substantive complaints since 1992 that raised significant red flags concerning Madoff’s hedge fund operations.”
Herein lies one problem with government failure. When the markets fail, the call is for more government. When the government fails, the call is for more government. The result is a slow but consistent march of government into our lives. The secondary and tertiary results are both great and unforeseen. The incompetence at the SEC will certainly continue, and if OWS looks for accountability in DC in addition to Wall Street, they won’t find it.