Garrett vs. SEC & Madoff

It didn't take long for the appointment of Representative Scott Garrett as Ranking Member of the committee overseeing the capital markets to pay dividends in terms of exposure and the chance to speak. Garrett's committee held a hearing today looking into the SEC's failure with regard to the Bernard Madoff scandal.

In Garrett's opinion, Madoff was able to do what he did due to a lack of communication and execution by the SEC. From his opening statement (posted in its entirety below):

There is discussion of "gaps" in our current regulatory scheme that need to be filled to prevent cases like this from happening in the future. I don’t believe that is the case. Each and every one of Mr. Madoff’s relevant businesses fell under the jurisdiction of one or more financial regulators. Given what we currently know about this situation, I do not believe there was a regulatory gap that needs filled with more, often excessive regulation. Rather we should be focused on ensuring that current regulations are being met and that proper oversight is occurring.

Garrett's opening statement, and subsequent comments as reported by the New York Times and Wall Street Journal, were restrained compared to others. Rep. Gary Ackerman had the quote of the day, as reported by Herb Jackson:

"Your value to the American people is worthless," Rep. Gary L. Ackerman, D-N.Y., told a panel of SEC department heads who said they could not explain what happened because of the ongoing investigation. "We thought the enemy was Mr. Madoff. I think it's you."

It's unbelievable that Madoff could get away with this, and it seems, the SEC did nothing for so long. For comparative purposes, direct costs and insurance claims for 9/11 were between $57 and $85 billion. Madoff's scam is estimated at $50 billion now, with Markopolos promising there are more funds yet to come forward.

When Madoff goes down, it should be interesting to see how he's prosecuted and what he gets. The idea that one man's greed could do as much damage to the economy as the hijackers leads me to believe he should be treated the same; and those at the SEC who sat on information should be charged as accomplices.

Here's Garrett's statement:

“Thank you, Chairman Kanjorski, for holding this important hearing today. I am excited about the opportunity to work more closely with you to ensure the long-term viability of our capital markets. I also want to thank all of the witnesses for their testimony.

“There is discussion of "gaps" in our current regulatory scheme that need to be filled to prevent cases like this from happening in the future. I don’t believe that is the case. Each and every one of Mr. Madoff’s relevant businesses fell under the jurisdiction of one or more financial regulators. Given what we currently know about this situation, I do not believe there was a regulatory gap that needs filled with more, often excessive regulation. Rather we should be focused on ensuring that current regulations are being met and that proper oversight is occurring.

“It appears the failure came from a lack of coordination or basic information sharing between agencies, specifically the different divisions within the SEC as well as FINRA.

“The failures at the SEC that allowed Madoff to continue to operate his Ponzi scheme for many years did not come from a lack of agency funding or authority but in performing and executing the responsibilities under the powers it had.

“We cannot end all fraud nor guarantee these changes would have prevented it. However, under appropriate due diligence, at least in this case, it appears that the improprieties would have been discovered earlier. But for the fact that Mr. Madoff came out and confessed, this scam would still be going on as far as we know.”