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SEC's Cox: we ignored Madoff warnings

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Let's have a big round of applause for the Republican doctrine of less regulation. Not only did the SEC have limited staff (because regulation is unnecessary) but the staff they have now look suspect. The lawsuit frenzy is about to start and investors will be targeting both regulators as well as the banks and investment firms who directed clients to the Madoff funds. It remains a mystery how a single person could manage the monthly statements for a $50 billion fund but we should start hearing more as the books are reviewed.

His remarks followed a day of growing demands for the agency to explain how it missed Madoff's alleged $50 billion fraud, including the apparent failure of regulators to spot numerous and massive inconsistencies during an investigation of his company that ended quietly in 2007.

Cox offered the beginnings of answers. He said the agency inappropriately discounted allegations, that staff did not relay concerns to the agency's leadership and that examiners relied on documents volunteered by Madoff rather than seeking subpoenas to obtain critical information. And Cox said the agency's inspector general would investigate whether personal relationships between Madoff's family and SEC staff played a role in the failed oversight.

"Our initial findings have been deeply troubling," Cox said. "I am gravely concerned by the apparent failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them."

The statement came as criticism of the SEC grew from legislators and former regulators for failing to check a number of Wall Street frauds and excesses that have been exposed by the economic slowdown.
It's always the same, with every business. When the cash is gushing out of the spigot, nobody asks questions.

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