The SEC is unsalvageable

By Felix Salmon
May 7, 2009

This is one of the driest pieces of prose you’ve ever seen: a 64-page report from the Government Accountability Office on the subject of the SEC, entitled “Greater Attention Needed to Enhance Communication and Utilization of Resources in the Division of Enforcement”. The “Results in Brief” spreads over six pages and is full of stuff like this:

While Enforcement had demonstrated success in carrying out its law enforcement mission, significant limitations in the division’s management processes and information systems hampered its ability to operate at maximum effectiveness and to use limited resources efficiently, and may have contributed to delays in Fair Fund distributions.

In other words, you’d have to be bonkers to try to read the whole thing.

All hail, then, the mighty Moe Tkacik, who has not only read the report but has distilled from it a picture of such utter dysfunction and managerial incompetence that her blog entry should be required reading for anybody who thinks that the SEC can conceivably be turned into an effective regulatory institution.

What’s entirely clear from Moe’s report is that you’d have to be a masochist of the highest order to work at the SEC. Since we don’t really want our capital markets run by masochists of the highest order, there’s a massive problem here. And I don’t think that there’s any feasible solution.


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The SEC is unsalvageable AND CORRUPT.

Over 5,000 complaints last year about naked shorting and nothing done about any of them. Sound familiar?

Until we, as citizens, refuse to put up with corrupt behavior by federal agencies designed to protect us from entities like themselves, there is little hope for our markets and our economy long term.

Two years ago Dendreon had a prostate cancer treatment approved by a FDA committee overwhelmingly but for the first time in the history of the FDA, a committee rec was ignored. Big Pharma, the SEC, the FDA and doctors with conflicts of interest favoring chemo therapy kept Provenge off the market and away from thousands of terminally ill cancer patients. You have to cry for the men and for our country. How did we get to this horrible place?

Now Provenge has met all additional requirements of the FDA and met them in a spectacular fashion. Now would be a good time to keep your eyes open and your calls going to your reps, the SEC and the FDA to let them know you are watching. If the naked shorts don’t ruin DNDN then lots of men will be saved from a horrible death.

Posted by Gates | Report as abusive

Burn it down. Start over.

After reading the last block quote in Moe’s post, I think I’m going to be sick.

Posted by Derek | Report as abusive

It’s really quite sad. At least in the ’70s, the SEC was truly a prestige agency. It had already started to go down hill pretty badly by the time Clinton came in. His administration didn’t give it the attention it should have, and the constant battles with Congress over keeping a greater portion of their fee revenue to upgrade their capacity was always dispiriting. But the last 8 years have been simply disastrous.

To add, I’m afraid The Epicurean Dealmaker is all too correct — burn it down and start over. It’s not just the SEC, though. I’m pretty certain we’d come to the same conclusion with other agencies, like the CFTC or the OTS. Even Treasury has been pretty badly hollowed out.

I’m not big on rearranging the deckchairs as a knee-jerk crisis response since bureaucratic resuffling rarely solves core problems. But this may be one time when we should take advantage of a crisis and, along with changing rules for the financial services industry, we should see this as an opportunity to blow up the regulatory bodies and start from scratch.

Sure, it’s just another dysfunctional taxpayer funded government mess.

But you miss the point in writing that you would have to be a masochist to work there.

Having been examined any number of times by these people when I was in asset management, experience shows that their default opening presumption is that you are guilty of theft and fraud. This mindset is propounded by the ever changing list of young lawyers who join for a year or two and are highly motivated to put notches on their resume, knowing that these will get them a plum job in private practice. Add their total ignorance of the businesses they are ‘examining’ and a total lack of numerate ability, and you have a prescription for failure.

in other words, the people at the cutting edge do not regard it as a career but merely a stepping stone to advancement. Take that mind set and add to it inept technological and personnel systems and you get the mess we have today, run by a cadre of lifers who redefine the word ‘loser’.

Much the same goes for the CFTC (truly the stupidest people I have ever encountered), and the NYSE examiners, though the latter sometimes have IQs in double digits. And don’t get me started on the CA Department of Corporations. The last examiner I knew would show at the start and end of his ‘audit’ – we always suspected he was at the beach in between.

Posted by Thomas Pindelski | Report as abusive

Read this yesterday
According to John Kenneth Galbraith, the late economist.
“Regulatory bodies, like the people who guide them have a marked life cycle,” Galbraith wrote. “In their youth they are vigorous, aggressive, evangelistic and even intolerant. Later they mellow, and in old age – in a matter of 10 or 15 years – they become, with some exceptions either an arm of the industry they are regulating or senile.”
By his thesis, the commission is about 60 years past its expiration date. But when it comes to usefulness, the SEC is beyond spoiled. It’s rancid.

Posted by Phil | Report as abusive

Interested in hearing more about Geithner’s financial regulation reforms? How about proponents of the reforms? Check out positive sentiment surronding financial regulation at

Posted by Ryan | Report as abusive