Why Do We Need a Multi-Agency Financial Fraud Task Force?
Posted by Larry Doyle on November 18, 2009 12:45 PM |
Should we take heart that the Obama administration is creating a multi-agency Financial Fraud Task Force? While there is no doubt there are massive frauds in the system, the mere creation of a task force does not necessarily mean the frauds will be rooted out. Why? If the agencies involved in the task force are themselves fundamentally and structurally flawed, then frauds will continue. If the agencies merely failed to execute or perform then perhaps this task force will expose those deficiencies and lessen fraudulent activities.
Which agencies will be involved in this task force? The Securities Industry News reports, U.S. Launches Multi-Agency Task Force to Prosecute Financial Fraud:
The task force will be led by the Department of Justice and chaired by Attorney General Eric Holder Jr., but will also include senior officials from the Department of Treasury, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the Federal Reserve System and other major federal agencies.
Thus, this task force would seem to consist of all government agencies while being led by AG Eric Holder and the Department of Justice. What does Mr. holder have to say?
“We face unprecedented challenges in responding to the financial crisis that has gripped our economy for the past year,” Holder said at a press conference Tuesday. “Mortgage, securities, and corporate fraud schemes have eroded the public’s confidence in the nation’s financial markets and have led to a growing sentiment that Wall Street does not play by the same rules as Main Street.”
Who is currently charged with regulating Wall Street? Primarily, the SEC and FINRA. Readers of Sense on Cents have learned plenty about the structural flaws of these two groups of keystone cops, from my writings and also from my interviews with Genevievette Lightfoot-Walker (former SEC attorney) and Richard Greenfield (attorney bringing suits against FINRA).
While there is little doubt our economy and markets need real ‘cops on the beat’ who truly perform for the sake of our country’s well being, I have decidedly mixed feelings about this task force. Why? In my opinion, the need for a task force to address fraud on Wall Street is a serious indictment of the Wall Street self-regulatory organization FINRA. I remain convinced that FINRA itself is structurally flawed and has been proven to serve at the behest of the industry rather than investors.
As such, will this task force merely be another layer of government bureaucracy to cover the incestuous relationship between Wall Street and Washington, or will it truly serve to disinfect the system from the stench of that relationship? While I am an optimist by nature, my confidence in this task force is not high.
I continue to believe in my premise from last May, “Future Financial Regulation: Not a Question of Sufficiency, But of Transparency and Integrity.” Transparency and integrity are true structural issues not merely a function of execution. How does one promote transparency and integrity? Clean house.