Wasn’t the SEC Supposed to be the “Investor’s Advocate?”

Wed, February 17, 2010

Changing the World, Democrats, Republicans

Please accept my apologies for the rhetorical question.

As someone who worked at the Securities and Exchange Commission for several years, I already know the answer to that question is, “yes.”  Unfortunately, that mission has gone missing and seems to have been replaced by keeping Wall Street bankers afloat at the expense of those of us who were just trying to save for retirement and our kids’ college educations.

When I worked there, first as an attorney in the Enforcement Division and then as Deputy Director of Public Affairs, I was excited about the work of the agency.  There was a lot of personal satisfaction in knowing that we were trying to catch the “bad guys” who did their best to get rich on insider trading schemes, “cooking the books” or just outright lying to clients.

When I was in the investigative trenches, I felt like I was really doing something to help others and that the SEC was an agency that tried to live up to its motto, even though it has historically been understaffed and underfunded.  When I made the move into the Public Affairs office, I had more time to see things from a different angle, and it became all too clear to me that many influential lawmakers on Capitol Hill really weren’t worried about investors and were more concerned with lobbyists who worked for investment banking firms and big corporations who were regulated by the SEC.

At the time, I thought maybe I was just getting too old for the job and that I’d become jaded as I watched those with money fight for legislation, while no one was really looking out for the investor.  There was a lot of talk about how “disclosure” made everything an even playing field — an assertion that even the least educated investor would know was, if you’ll excuse me, a crock.

I knew things were headed in a bad direction when Congress was able to repeal the laws that kept commercial banking (where we deposit our money) and investment banking separate.  When Glass-Steagall was repealed, I had a bad feeling that all bets were off.   The new Gramm-Leach-Bliley Act not only repealed the laws that kept us protected from the inherent greed on Wall Street, but it opened the floodgates for the Gordon Gekkos of the world.  Those Gordon Geckos convinced a greedy and naive Congress that of course they could be trusted not to let their greed overrun their investment houses and that of course they would always keep the investors’ interests as their primary focus.  No need for all those burdensome regulations that cost so much money, they claimed.

There were warnings during the process (read: Brooksley Born), but no one listened.  There continue to be warnings (read: Elizabeth Warren) — the biggest one being the near meltdown of our whole economy — yet, there is still no one listening.  The SEC has been badly weakened by Congress and now Congress blames the SEC for not keeping investors safe, not to mention the blame they also give to the  alphabet soup of other institutions that are supposed to be watching over those who make their money on imagining ever-more convoluted schemes like credit-default swaps and mortgage-backed securities.

A few on Capitol Hill are pushing for financial regulatory reform, but you can be assured the same investment banks that were saved, the same ones whose employees put us in the tank and are now getting fat bonuses, are the same ones lobbying again to make sure that people still believe that ‘greed is good.’

I’m glad Paul Volcker is higher up on President Obama’s radar screen these days than Tim ‘pay-no-attention-to-my past-links-to-Wall-Street’ Geithner.  But Geithner has made it clear he doesn’t like those who oppose him (read: Shelia Bair).  Again, as I’ve asked before — why are people willing to pay attention to a bunch of guys who now want tighter regulation, but brushed aside expert women who years ago who raised the same issues?

I suppose that’s my second rhetorical question today.

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