Remember the brouhaha at the “beginning” of the financial crisis when McCain said he would fire Christopher Cox from his position at the helm of the SEC, how everyone mocked McCain? Well, on this one at least, given the revelations of the Mad Madoff scandal, John may have been right. It seems Cox’s SEC had been getting plenty of warning (for years) about the nefarious and nutsy Mr. Madoff and didn’t do anything. Does Cox deserve to survive this? The bigger question – and it’s a scary one – is how many other Madoffs are out there waiting to be uncovered?
“Does Cox deserve to survive this?”
Christopher Cox probably does not deserve to survive. And yes, it appears that John McCain got this one right. His overall knowledge in economics leaves much to be desired. Still, he did try to put a stop to the Fannie Mae and Freddie Mac lunacy before it exploded in our faces. But are there any other Republicans who deserve to be rebuked? Much of our current grief still seems to be the fault of Democrats like Christopher Dodd and Barney Frank. It is my understanding, for instance, that Bernard Madoff contributed to Democratic Party politicians 89% of the time. That sounds about right to me. Isn’t it fair to say that the Republicans are only responsible for roughly 10% of the mess?
In fairness, and recognizing that there’s still plenty of stuff I disagree with McCain on, he’s often been right when the party’s been wrong. Lebanon, for example. Does anyone seriously still think that removing the filibuster would have been a great idea? And more. Not to say that he’s often been dead wrong, but let’s keep in perspective that he’s often been dead right.
As for Christopher Cox, yeah, it’s funny how the media lambasted him by claiming that the President couldn’t fire him (though he can). It reminds me of how Constitutional Law Expert Biden upbraided Sarah Palin over the role of the vice president– except that he was wrong, factually provably wrong. The media played along with him anyway.
Anyway, I guess that’s all over. The Madoff scandal is extremely disturbing, not the least of which because there were people, reputable people, blowing the whistle eagerly for 9 years now, and yet nothing was done. I strongly suspect that he will go to jail, but that his network of enablers and supporters will go uninvestigated. Reminds me of the Naked Short Selling controversy a few months ago– again a whistleblower is vindicated, the public is cheated to the tune of billions, see one-column whitewash on page B24.
So we need more active regulation of financial markets and services. This should include some strict prior restraints on the kind of deals and instruments that can be created. Yes?
Or is this pain worth the gain?
Or can the pain be never worth the gain because the peole who get the benefits are not the same as those who suffer?
Clue: the answers are Yes, No, Probably.
(Brouhaha. A word I haven’t used often enough.)
“So we need more active regulation of financial markets and services.”
This could cause far more harm than good. Sarbanes-Oxley, for instance, has added significant costs to publicly traded businesses without really accomplishing anything. I strongly suspect that we need better journalists more than we need attention seeking politicians. The MSM did an abysmal job during this period.
The people who gave their money to Madoff with almost no effort to understand his investment practices are the ones at fault. They thought they were getting a 40% return. Does anyone remember the old saw,”You can’t cheat an honest man ?” I’ve seen a couple of interviews and it is appalling how little effort they made to be informed about what was happening. Easy come, easy go. You cannot regulate this sort of thing.
That’s old money and it’s all gone now. Now we can get down to business and just print up a new batch.
Not only did John McCain call this and was right, but he was behind the surge and on this he was also right. It seems several of the press are now eating a little crow regarding their past reporting on McCain’s strong reasoning why these facts should be done.
Being right doesn’t help if you can’t communicate why. Or, as one of my graders in my freshman maths course wrote, “THIS IS NOT THE S.A.T. SHOW YOUR WORK!”
The way Madoff got investors was a classic con.. I still think, though, that he tried at first to make things work.. got in deep in some derivatives, doubled down, tried to dig out of the hole without having to admit he was in it.. and then at some point he resigned himself to Ponzi and kept on going down that road.. I don’t think he was a thief from the beginning..
But it takes a dimwit to hand over millions without doing any due diligence. Your ‘friends’ can be as stupid as anyone, so why take their recommendations?
Personal responsibility– it’s SO over.
the SEC and cox are responsible for creating this world wide recession from what would have been a manageable mortgage bubble.The 2006 mark to market rule was adopted by the SEC despite objections from just about every other agency including foreign financial institutions.They compounded this by abolishing the “uptick” rule which allowed short sellers to sell short all our large banks into the ground.They have obstinately refused to change these rule or even consider temporary changes to allow our markets to stabilize.Cox and the SEC staff have done more harm than anyone since Stalin.
Cox failed to appoint people to the open positions at the SEC to oversee investment banks buying these packaged mortgage securities.
I’ll be fair and say that even if he did hire the two or three people to watch them and they used the best financial monitoring models we had at the time (re: which were not good in hindsight) we might have still missed it… none the less… we didn’t even have the two or three people watching that we could have. It’s his fault for that (not ‘deregulation’ by the way)… he should go.
The finger pointing for Madoff goes right at the SEC staff — both in DC and the New York Regional Office (the largest of the regional offices) — it is the staff that “runs” Commission and controls most of what comes before the Commissioners. The staff was also at the receiving end of the stories about Madoff fraud — stories going back, at least, to the late 1990s. SEC staff ineptness is where the focus should be.
As for the above comment blaming the SEC for the recession: I would “suggest” as many already have, that the blame is squarely on the shoulders of Fannie, Freddie and those in Congress that opposed efforts to bring them, and their “implied” government guarantee under better control. Fannie and Freddie long contributed heavily to all the key members of the Senate and Congress and “locked-up” the services of practically the universe of DC lobbyists and esquires to prevent them from working for the other side.
Let me provide some perspective and additional facts:
- The Madoff case apparently never made it to the Commission. So Cox would have had no idea. So the failure was on the part of the staff in the New York office. My experience is that the NYC office of the SEC is about 152% Democratic, and it was probably not lost on them that Madoff was a big wig with many friends in the Dem power hierarchy. SEC staffers do get invited around town quite a bit. The New York AGs office is even more connected to dem power structure. One question: was there any contact between the Dem congressional NY delegation and the SEC staffers re: Madoff ? That is the real question.
- To get serious the SEC needs to bring in the DOJ and they would have been very connected to Madoff.
- Whistleblowers would have done well to contact FINRA, as well as the SEC. FINRA is the statutory SRO and has a lot more active cops on the street and examiners of books.
Kurtis
Number of cases the SEC has uncovered on its own like this in history: 0
Number of cases the SEC has uncovered on its own under Cox’s watch: 0
The problem isn’t Cox. The problem is that the SEC isn’t set up to do preemptively strike on this kind of thing. Today’s WSJ had an article about how their enforcement staff has increased by 33% during the Bush years, to 500 people. Yet they do not actually discover fraud, they wait for tips and then act. And this has been true since long before Cox. And it will be true long after Cox.
One might argue that Cox might have done something to change the culture, structure, and operations of the organization. But that’s a much different argument, and one that implies that he was given a mandate to do that. He serves at the pleasure of the President, and all.
There are a lot of people who need serious jail time in the Wall Street part of this nation’s economic ‘meltdown’. That they don’t or won’t get that jail time, that they are allowed, like Madoff, to post bail and walk free to enjoy the fruits of their cons, is sickening. It is about time that “zero tolerance” is used on those who actually have done harm to citizens, no matter how much their political contributions were.
I won’t hold my breath.
Kurtis – bullseye!
It seems to me that the only way that Madoff could keep getting away with it was the regular greasing of palms at the SEC. Calling these payments Democratic party campaign contributions was merely putting an ostensibly legal gloss on them. I think the whole NY office of the SEC should be hauled in front of a corruption grand jury, and heads should roll. Cox should go, because he is ultimately responsible, but not before he has done his job as executioner.
Umn, by the time McCain said Cox needed to be fired it was well beyond obvious that he needed to get the axe. But lets ignore the reason he needed to go, his brand of “let the system regulate itself” purist idealogy should be a warning to free-marketeers that there are limits to what the free market can do. (Not to say we need to start subsidizing every industry this side of the border, but we’re now in a position we have to do more than we would ordinarily or risk acute systemic failures)
Removing the filibuster for judicial appointments would only bring us back to the pre-1947 rule for filibusters. In that year segregationist Democrats, afraid of an emerging Republican (and anti-segregationist) majority pushed through the rule change. It makes sense to revert the rule whether you favor Democrats or Republicans on this basis alone. The courts are being held hostage to ever-increasing partisan bickering.