The SEC isn't just failing ... it is a criminal enterprise.

It was the SEC that protected Bernard Madoff for 70 years while he fleeced investors of billions of dollars.

Remember that concerned accountants and others reported Madoff's Ponzi scheme to the SEC, and the SEC promised to investigate.

And investigate they did. They claim to have conducted an exhaustive probe. Madoff was allowed to continue with his business practices.

How else could that occur unless our government had been compromised?

The SEC has been compromised. It has been turned into a criminal organization no different from the cop on the beat allowing a drug dealer to operate.

When to institute major reforms in financial regulation strikes me as a very hard problem right now. On the one hand, Gordon's right--the rescue is rightly sucking up the relevant players' energy and attention right now, and regulatory reform is a complicated topic that can be easily botched if rushed. On the other hand, Weidner may well be right that needed political pressure may subside before too long. Plus, the uncertainty created by the potential for reform without knowing what it will look like may itself cause big problems for financial markets. So, when is the right time? I agree, not yet. But within the next year or so? That seems roughly right.

The SEC is not the only institution which has been compromised. The Federal Reserve also has some people working for it that are, shall we say, not impartial.

http://money.cnn.com/2009/05/07/news/economy/NY_Fed_Chair_Resigns/?postversion=2009050718

Undoubtedly using his vast insider knowledge, the chairman of the Federal Reserve Bank of New York bought stock in Goldman Sachs while serving as chairman.

"The New York Fed's general counsel, Thomas Baxter Jr., defended Friedman's recent stock purchases, which occurred while the Federal Reserve was weighing [a] waiver request. Friedman bought 37,300 shares worth $3 million in December 2008, according to the [Wall Street] Journal."

The important part is next, and keep in mind while you read this that this person is, next to Ben Bernanke, the most important person at the Fed:

"He didn't check with the Fed, and lawyers at the New York Fed told the Journal they were not aware of the purchases until the newspaper contacted them last month."

So, here you have a federal regulator with deep insider knowledge about what will occur in the future with our banks. And this person is trading in stock on that information without telling the Fed, and in violation of the law.

Is he arrested? Surprisingly, no. The Securities and Exchange Commission regulates insider stock sales; and despite it being common knowledge that the chairman of the largest Federal Reserve bank is trading illegally, the man is merely allowed to resign quietly with his million of dollars in illicit gains once his activities became public.

Our government has been compromised.

Here's the Wall Street Journal on Friedman's resignation:

http://online.wsj.com/article/BT-CO-20090507-725431.html

The important paragraph is as follows:

"Referring to Friedman's purchase of additional Goldman shares in December and January, Baxter wrote "it is my view that these purchases did not violate any Federal Reserve statute, rule or policy."

Note that he does not say the trades don't violate our nation's insider trading laws... just Fed rules and policies. I guess it's a good thing for Friedman that the SEC is also corrupt!

Also, keep that paragraph in mind.

What Mr. Baxter is saying is that it is not against Fed rules for the employees of the Federal Reserve to trade in the stock of companies they regulate with insider knowledge of how they are reshaping the banking landscape in this country. It is the Fed, working hand in hand with a former Fed employee at the Treasury Department, which is deciding which banks will be liquidated and which ones won't be.

The foxes are guarding the henhouse.

Is it any wonder that people are removing their money from banks?

Can anyone have any faith in a government this obviously and openly corrupt?

By the way Gordon, this post is the quintessential explanation for why the nation's newspapers are going under.

Here we have actual, honest to God news revealing high-level government corruption, and I'll bet most of your readers are unaware of this story.

Newspapers don't want to cover any story that brings disrepute on Dear Leader and "Tax Boy Timmy" Geithner.

There's plenty of ink and airtime to cover the President's purchase of a Grey Poupon-laden cheeseburger; but if you want to really understand what's going on in this country, you can't do it by reading a newspaper or watching television.

You have to be reading blogs.

What an odd op-ed. You'd get the feeling that the success of the SEC's enforcement program is measured by how often it litigates cases against the very top executives at brokerage firms. Whether they need it or not.

And Kennedy wasn't a major Wall Street player? The tradition of prosecution died out with Donaldson? (What does he call the 1950s?) My suggestion is the Weidner needs a copy of Seligman's "Transformation of Wall Street."

The drumbeat to eliminate the SEC was never going to go very far once Democratic committee chairs recognized that the alternative was to create a single regulator under the Fed, with little focus on investor protection. If Weidner didn't realize that, he just wasn't paying attention.