Opinion

Felix Salmon

SEC datapoint of the day

By Felix Salmon
June 1, 2009

From Zachary Goldfarb‘s piece on the SEC:

During Cox’s tenure, penalties imposed on companies fell 84 percent, from $1.59 billion in 2005 to $256 million in 2008.  

Goldfarb’s piece adds a bit of background to Moe Tkacik’s devastating precis, last month, of the GAO report on the SEC. Essentially, the SEC commissioners hated imposing penalties on companies, for the wonderful reason that such penalties were “ultimately were shouldered by shareholders — the very people most frequently hurt by fraud”.

And it’s not remotely clear that the SEC is fixable:

A backlog of financial crime cases continues to slow the enforcement division as Schapiro tries to turn more of the agency’s attention to abuses linked to the financial crisis, SEC officials said. The agency is still working to reinvigorate its dispirited enforcement ranks.

The whole story of dysfunction and cronyism reminds me of nothing so much as a season of The Wire — and of course the lesson of that great series is that nothing is ever fixed, and that hopes will always be dashed. Good intentions aren’t remotely sufficient to enact change in an agency as broken as the SEC. Which is why any new regulatory structure would best avoid the SEC entirely, rather than trying to reinvent it.

(Incidentally, if you’re looking for other stories which are straight out of The Wire, try here or here. Once you start looking, they crop up everywhere.)

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