April 19, 2010
– Comments (3) |
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The SEC, like nearly all other parts of our government, has been hijacked and subverted by those over which it was given the authority and the intent to watch.
That's the problem.
If it weren't for the SEC, you wouldn't have audited financial statements to read over, unless the companies volunatarily offered you them. Back in 1929, the percentage of publicly-traded companies that did this was about 20%. Which partly explains why the markets became so ridiculously overheated.
I think the problem with the SEC isn't its existence --- rather, it's that it relies too much on political mechanisms. Our system of public filings works great because, after all, anyone can read them. And any private individual can go to the media with information they discover in those statements. Nowadays, anyone can blog about it, as well.
If Madoff had been required to have filed audited financial statements with the SEC, he would have never gotten away with what he did. There's a reason Enron got caught and Madoff didn't (until after a few decades). Enron was subject to greater scrutiny by virtue of being a publicly-traded company.
In this sense, the public filings with the SEC allow the market to enforce itself. And once stuff becomes public, the SEC is forced to act quickly.
I don't know of more specific suggestions to improve the SEC; but I do think creating mechanisms (like the public filings) that allow all market participants to investigate tend to work much better than relying on the will of a handful of men and women; who might be driven by political considerations to look the other way (or to not put much effort into discovering problems).
The SEC should get a % back of the money of the fraud that they expose and then dispense a % of that money to the analysts/managers involved in the exposure/verdict. Kind of like Wall Street bonuses.