Is the SEC Effective?

by Gerri Willis

Former US SEC General Counsel Becker testifies at a hearing on Capitol Hill in Washington. 09/22/2011. You might have heard the news recently that the victims of Bernie Madoff would get some of their money back. The news was bittersweet - that's because those folks are only getting some of the money, just $312 million was expected to be distributed. Total losses of victims? $17 billion.

It's still tough in this country to steal $17 billion without anyone noticing - and if you're wondering where the cops were - well, that is a smart question. Truth is, the announcement about payments to victims got lots of attention - but another announcement, this one from regulators at the Securities and the Exchange Commission, got too little attention this weekend.

Four years after Madoff's arrest - the SEC said it had disciplined eight employees for failing to uncover the pyramid scheme over a 16-year period. What's notable here? Nobody lost their job. The biggest Ponzi scheme in the world operates in plain sight right under the noses of the nation's biggest securities regulators - and everybody keeps their jobs. Unbelievable!

But frankly, it's not the first time that the SEC has missed a big fish. Allen Stanford, the Texas-based financier ran a Ponzi scheme for 12 years before the agency halted the fraud, potentially costing investors more than a billion dollars. That according to an agency watchdog's report.

In both cases, the SEC was given tips but couldn't translate the tips into a successful prosecution. Then there are the companies that commit violations. When the SEC manages to find one of those, the form of punishment is usually a few bucks and a vow to never do that bad thing again.

The New York Times recently conducted an analysis of the "punishments" handed down by the SEC over the past 15 years. At least 51 cases involved Wall Street firms breaking a law they had agreed never to break again!

Last month, Citigroup had to fork over $285 million to settle charges it defrauded customers -- they had to promise to never do it again - but guess what - that was them doing it again!

Citigroup had already agreed not to violate that exact antifraud statute in 2010, 2006, 2005, and 2000! Bank of America has promised not to violate that law four times since 2005, they made the same promises four times regarding a separate law. In fact, the list of repeat offenders goes on and on and on. A Wall Street who's who if you will. AIG, Credit Suisse, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Raymond James, UBS, Wells Fargo, etc.

So obviously this practice is not deterring the bad behavior - so why do they do it?

The SEC told the Times the "never-do-it-again promises" were a much cheaper form of punishment than taking big banks to court. Especially if they lose! And as if that wasn't bad enough, another problem plaguing the SEC? They don't actually make the company admit their mistakes or wrong-doings!

So Citigroup or Bank of America can simply shell out a few million dollars. And never have to face what they did wrong. The public is never the wiser. This is outrageous.

Don't forget this was the agency whose workers spent more time surfing porn then looking out for the consumer! If the SEC doesn't have the ability to actually catch warning signs or enforce the law - maybe it's time to streamline this process.

The Justice Department can throw these crooks behind bars - that sounds good to me!

Jon Corzine: Too Big to Jail?

by Gerri Willis

The head of the Securities and Exchange Commission - Mary Schapiro - told Fox Business today that the collapse of MF Global is not a failure of regulation - just a failure of a firm making stupid decisions.

Investors in MF Global - the bankrupt trading firm run by Jon Corzine are still trying to get their money back! Nearly $600 million is still missing. So, how did MF Global become the eighth biggest bankruptcy in American history?

You only have to look at Corzine's connections to the business and political world for some clues: Corzine is the personification of the "Revolving Door" - going from Wall Street to politics and back again - a career spanning four decades. He first made his fortune as one of the so-called "Masters of the Universe" at Goldman Sachs. That is until he eventually was pushed out in 1999.

He then used about a quarter of his fortune - an estimated $100 million - smashing all sorts of spending records - to run as a liberal democrat - eventually winning a Senate seat - he then became a governor of New Jersey. Voters eventually fired him too - after he nearly wrecked the state. He left Trenton and became the CEO of MF Global.

Corzine very quickly tried to make the company into a mini-Goldman Sachs. He lobbied the New York Fed to make MF Global one of the handful of banks authorized as primary dealers of U.S. treasury bonds. Corzine got his wish: The man who helped him get it was the New York Fed's president and CEO - William Dudley - a partner at Goldman until 2007.

After MF Global collapsed, many including us here at the Willis Report are asking: Where are the regulators?! The chief regulator is Gary Gensler - he heads the CFTC - which is investigating this whole mess. Gensler, who just today announced he's recusing himself from this case, has long and deep ties to Corzine. When Corzine was running for governor, Gensler chipped in $10,000 to the state Democratic party - to help get Corzine elected.

Gensler also worked with Corzine on Capitol Hill - crafting rules and regulations for Wall Street. Corzine also worked along-side former Treasury Secretary Henry Paulson at Goldman Sachs, Paulson was the one who pushed for the massive bailout of Wall Street and the taxpayer rescue of Fannie Mae and Freddie Mac. Speaking of Fannie and Freddie - there's James Johnson. He joined Goldman Sachs the same year Corzine led the company.

Johnson was a top executive at Fannie Mae in the 1990s - and walked away with tens of millions of dollars in compensation - while at the same time driving the housing market off a cliff.

Nice work if you can get it.

Corzine has also been part of the ‘Bilderberg Group' a who's who of the rich and powerful international elite - including some boldface American names: Ben Bernanke, Timothy Geithner and Bill Clinton just to name a few. These guys get together every few years to solve the world's problems over cavier and chardonnay.

But it's not just former presidents Corzine rubs shoulders with - despite President Obama decrying ‘Wall Street Fat Cats' - Corzine has already helped to raise at least half-million dollars for President Obama's re-election.

And Obama's current EPA commissioner - Lisa Jackson - was also in the Corzine cabinent when he was governor of New Jersey. Corzine's No. 2 at MF Global, Bradley Abelow, worked for the Obama administration, was also in Corzine's New Jersey cabinet and was a top executive at Goldman Sachs!

As for that half-million? The Obama campaign says it will give the money back - if Corzine is convicted of a crime. But if history is our guide -the kind of Wall Street firms Corzine once ran became ‘Too Big to Fail.'

Maybe Corzine himself will be too ‘Big to Jail.'

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