Examiner Editorial: Hapless SEC now able to hide its secrets 

‘No one will know until this is actually in place how it works,” Sen. Chris Dodd, D-Conn., said of the Senate’s slapdash financial reform bill. He ought to know: Dodd co-sponsored the bill with Rep. Barney Frank, D-Mass.

Two weeks after its passage, we’ve already seen one outrageous result. Thanks to an unnoticed provision of the bill, the Securities and Exchange Commission is now declaring itself exempt from Freedom of Information Act requests, one of the bulwarks of government transparency.

Perhaps no other government agency has seen so many high-profile failures in recent years than the SEC. The regulatory agency failed to anticipate the collapse of insurance behemoth AIG, and it whiffed on the related mortgage securities free-for-all that wrecked the economy, prompting billions in taxpayer bailouts. Despite warnings about his dealings going back to 1992, it failed to act on numerous tips that Bernie Madoff was running a $65 billion Ponzi scheme. The SEC also missed mountebank Allen Stanford’s billion-dollar Ponzi scheme, despite tips going back 12 years.

Harry Markopolos, one of the prescient Madoff whistle-blowers, has since said the SEC was not only “financially illiterate” but also “captive to the industry it regulates and ... afraid of bringing big cases against the largest, most powerful firms.” It’s thanks to Freedom of Information Act requests that we know the SEC failed to act earlier on Madoff and Stanford.

More recently, the SEC’s inspector general launched an investigation into the recent securities fraud settlement with Goldman Sachs. Despite what appeared to be an open-and-shut fraud case, the SEC settled with Goldman for $550 million, or a measly 0.03 percent of the cash assets the firm held in the first quarter of the year.

There’s also the matter of the timing of the settlement. It was announced just hours after Senate passage of the financial reform bill, which we now know insulated the SEC from outside probes about its backroom dealings. At least one SEC commissioner who voted against the settlement questioned the political motives of her colleagues in the pages of The Wall Street Journal.

Rep. Daryl Issa, R-Vista, the ranking Republican on the House Oversight and Government Reform Committee, recently told the Fox Business website that there’s a 100 percent chance the law can be overturned. That can’t happen soon enough. For now, we don’t know what secrets the SEC is holding, but whatever they are, it looks like Congress and the SEC have gone to extraordinary lengths to hide them.

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Staff Report

Staff Report

A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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