The House Financial Services Committee on Monday began the first Congressional inquiry into how Bernard Madoff’s alleged Ponzi scheme lasted for decades without being noticed by federal regulators.

Congressman Spencer Bachus, R-Ala., noted that an investment advisor named Harry Markopolos had alerted the Securities and Exchange Commission as long as a decade ago that he believed Madoff’s business was a giant fraud.

Bachus said the U.S. regulatory system needs to be updated if other frauds are to be detected.

“What’s needed is a statutory and regulatory structure for the 21^st Century,” he said.

Bachus said frauds like the one for which Madoff has been charged “don’t occur in isolation.”

If future scams go unnoticed, it can only further erode voter confidence, already badly shaken by a sharp economic downturn and now by Madoff’s own reported admission that his scheme may have taken in $50 billion in investment funds.

“Every day brings more news of the devastationg effects of the Madoff scandal,” Bachus said.

Markopolos was scheduled to appear at the inquiry but cancelled due an illness.

David Kotz, the SEC’s inspector general, was also scheduled to testify.

In a statement released before his appearance, Kotz offered a detailed description of his office’s duties and recent completed investigations.

With regard to the Madoff allegations, Kotz said his office is now charged with investigating all aspects of Madoff’s contacts with the SEC, including those with family members.

One of Madoff’s nieces is married to a former SEC official.

Kotz said his office's probe will go beyond specific issues that SEC Chairman Christopher Cox asked him to investigate, adding that it also will examine the operations of the SEC's enforcement and inspection divisions and will make recommendations.

The Securities Investor Protection Corp. and the trustee handling the liquidation of Madoff's firm said Monday they mailed more than 8,000 claim forms to customers on Friday. Besides individuals, others who lost money were big hedge funds, international banks and charities.

Madoff has been released on $10 million bail and is under house arrest at his apartment on the Upper East Side of Manhattan.

On Monday, federal prosecutors asked that his bail be rescinded.