Tales from the Trail

Lessons in ignoring red flags from the SEC

The Securities and Exchange Commission, which has the power to strike fear into the hearts of financial types, is the one getting beaten up today by its own inspector general.

Turns out that tips came in over 16 years that should have raised red flags and could have uncovered Bernard Madoff’s $65 billion ponzi fraud before his December 2008 confession. ASIA-EUROPE/

Even Madoff was “astonished” that the SEC did not follow up to verify his testimony about clearing trades through a third party, saying he had actually thought it was “game over” at that point.

These types of reports generally generate a lot of finger-pointing (congressional hearings offer a showcase) and sirens wailing for reform. The trouble is there’s never a quick fix.

It’s been eight years since the Sept. 11 attacks and the government is still working on reform of the national security aparatus after it became clear that various agencies had dropped the ball.

The First Draft: Sovereignty Day

IRAQWashington is a town of euphemisms, where “mistakes were made” but nobody takes responsibility, where lawmakers routinely refer to each other as “my good friend” before questioning their buddies’ sanity or moral character.

The Washingtonian art of the euphemism apparently has been learned in Baghdad, where to mark today’s departure of U.S. forces from Iraqi cities, Prime Minister Nuri al-Maliki declared National Sovereignty Day and celebrated with a military parade.

As U.S. combat units get out of Iraq’s urban areas and move into rural bases, Pentagon leaders will be speaking, though not in Washington. Defense Secretary Robert Gates addresses a NATO change-of-command ceremony in Stuttgart while Army General Ray Odierno, the U.S. commander in Iraq, briefs reporters via video link.

Obama urges graduates not to follow Madoff’s path

91TEMPE, Arizona – President Barack Obama warned graduating students on Wednesday not to follow in the footsteps of swindler Bernard Madoff as they enter the workforce and look for jobs.
The U.S. president, delivering a commencement address at Arizona State University, told a crowd of tens of thousands that big money and fancy titles should not be a priority while the country faced recession and two wars.
“The leaders we revere, the businesses and institutions that last — they are not generally the result of a narrow pursuit of popularity or personal advancement, but of devotion to some bigger purpose,” Obama said.
“The trappings of success may be a by-product of this larger mission, but it can’t be the central thing. Just ask Bernie Madoff.”
Madoff, 71, pleaded guilty in March to operating a huge Ponzi scheme in which early investors are paid with money from new clients. He is likely to spend the rest of his life in prison.

Photo credit: REUTERS/Kevin LaMarque (Obama speaks during Arizona State University commencement ceremony, May 13, 2009)

The First Draft: Down to business

The White House puts its focus back on the economy today, with a day-long conference to talk about how the money from the economic stimulus package is being spent.

President Barack Obama is due to speak at the “Recovery Act Implementation Conference” at 11:00 EDT (1500 GMT). He is expected to talk about the need to make sure all the money spent as part of the stimulus is transparent and used efficiently. Later in the day he will speak and take questios at a business roundtable.

The timing is perfect: a Reuters survey showed U.S. unemployment will approach 10 percent as the country endures its worst recession since World War Two.

The First Draft: what about the pork?

So the Democratic-controlled Congress finally sent President Barack Obama a $410 billion bill to fund the government through the rest of the year. But it’s full of “earmarks” — billions of dollars earmarked for lawmakers’ pet projects.ROMANIA/

Obama has repeatedly criticized Congress for including the so called “earmarks” or pork in various legislation but he is expected to sign the spending bill. However, he also plans to make a speech criticizing the whole process of earmarks.

Question is — does he speak out against the pork then sign the bill? Or sign the bill then criticize it? Obama is due to speak about “earmark reform” at 11:20 EDT/1520 GMT.