Sense on Cents

On June 19th, in writing, Who Protects Investors from Regulators? I concluded,

Sad but true, as we enter the Brave New World of the Uncle Sam economy, investors need to remain diligent and should not assume that regulators are necessarily protecting them.

In my commentary that day, I specified shortcomings at the SEC and FINRA.

This morning, I am both heartened and dismayed by Gretchen Morgenson’s article in the Sunday New York Times Business section. Ms. Morgenson writes, But Who Is Watching Regulators?

I commend Ms. Morgenson for addressing a topic which receives little focus by the media at large. As such, I strongly recommend reading it. Ms. Morgenson pens:

Senior regulators who stood idly by for years as financial firms built their houses of cards have been rewarded with even bigger jobs or are jockeying for increased responsibilities. The Federal Reserve Board, for example, wants to become the financial system’s uber-regulator, even though its officials did nothing as banks made deadly decisions to lend recklessly and leverage themselves to the max.

Awarding increased power to those who failed in their oversight duties flies in the face of all notions of accountability.

Additionally she asserts:

Yet those in the public sector ask us to believe that regulators who snoozed during the credit bubble will be alert to emerging problems on their beats when the next mania begins.

That’s asking a lot, isn’t it?

Here’s a novel thought. Instead of creating more regulations to try to prevent this kind of mess from recurring, why not figure out how to hold regulators accountable when they perform as poorly as they did in recent years?

I am with Ms. Morgenson and pulling for her to ‘finish the job’ and call out specific regulators and specific regulatory bodies. I was so hopeful that this was the article that would call out Mary Schapiro (current head of the SEC), and Richard Ketchum (current head of FINRA) and take them to task for not providing real transparency at FINRA (Financial Industry Regulatory Authority), the Wall Street self-regulatory organization. (more…)