The SEC is a charade - so are the government supervisory entities are including finance committees of the House and Senate

Basically the government works for the establishment and has no other function than to establish laws, which allow them to screw the people and cover it up. This whole thing needs a dramatic overhaul and investigation but who should conduct a prudent one? The CIA produced false evidence to start a pathetic war, the FBI seems busy with controlling its own citizens, democracy is basically tuned into a legal mobster organization where the 'power' can act as they please. The Administration has gathered powers it should not have and the system has developed its own rules and regulations beneath the regular frame work of the constitution and laws. The Madoff case is just an indication of how the systematic undermining has reached out.

It's outrageous how the government throws around trillions of dollars to save the financial interests of a few but gets discriminating when it comes to $14 bil. for carmakers. The financial industry does not survive on its own merits either but that seems to be a different logic. Even Goldman would be bankrupt without the massive bailout the government made - so why do some Republican Senators get suddenly smart when it comes to the auto industry, which at least produces a real good? The finance industry mostly produces digital and hypothetical products, which are as dangerous as the whole nuclear arsenal of weapons. Things are completely out of balance or rather completely insane when it comes to taxpayers' money allocations. The same money spent for the institutions could have been spent much wiser and more effectively, but that's not the intention of the people in charge as they are responsible for the mess anyway.

SEC Failed to Act on ‘Credible, Specific’ Madoff Tips, Cox Says

By Jesse Westbrook

Dec. 17 (Bloomberg) -- U.S. Securities and Exchange Commission Chairman Christopher Cox said the agency failed to act for almost a decade on “credible and specific allegations” of wrongdoing by Bernard Madoff, who authorities say bilked investors of as much as $50 billion.

Allegations dating back until at least 1999 “were repeatedly brought to the attention of SEC staff, but were never recommended to the commission for action,” Cox, 56, said in a statement yesterday. He announced an internal probe to review the “deeply troubling” revelations.

“He’s revolted by what he found out, but it’s also in his interest to be revolted,” said James Cox, a securities law professor at Duke University in Durham, North Carolina who isn’t related to the SEC chairman. “He’s taken a lot of heat over SEC enforcement.”

The SEC, already faulted in connection with the collapse of Bears Stearns Cos. and Lehman Brothers Holdings Inc., now faces criticism for failing to detect what Madoff termed “a giant Ponzi scheme.” Senate Banking Committee Chairman Christopher Dodd yesterday called on the agency to explain how the “massive fraud” went undetected. Madoff, 70, was arrested Dec. 11 after he allegedly told his sons that his eponymous firm, founded in 1960, was no more than “a giant Ponzi scheme,” the SEC said.

Instead of wielding subpoena power to obtain information, SEC staff “relied upon information voluntarily produced by Mr. Madoff and his firm,” Cox said.

Mandatory Recusal

The internal review will include “all staff contact and relationships with the Madoff family and firm,” he said, and mandate the recusal any SEC employee with more than an “insubstantial personal” contact with Madoff and his family.

Eric Swanson, a former assistant director of compliance and examinations at the SEC, is married to Madoff’s niece, Shana, who was a compliance lawyer at the Madoff firm. Swanson left the SEC in August 2006 and is now the general counsel of Bats Trading Inc., the third-largest U.S. equity exchange by trading volume.

Bats defended Swanson.

“Eric Swanson worked at the SEC for 10 years and did not participate in any inquiry of Bernard Madoff Securities or its affiliates while involved in a relationship with Shana, whom he met through her trade association work in the industry,” Bats spokesman Randy Williams said in statement. “Throughout his career, Eric has displayed the highest ethical standards and his reputation has been, and continues to be, above reproach.”

Tokyo to Paris

Victims of Madoff’s fraud stretch from Tokyo to Paris, encompassing foundations set up by Boston philanthropist Carl Shapiro and Nobel laureate Elie Wiesel and clients of global banks such as Banco Santander SA of Spain, Nomura Holdings Inc. of Japan, and HSBC Holdings Plc of the U.K. Yeshiva University in New York lost $110 million, mostly through hedge funds controlled by trustee J. Ezra Merkin.

Cox said a review of the SEC’s records so far has exposed “complicated steps that Mr. Madoff took to deceive investors, the public and regulators.” He said Madoff “kept several sets of books and false documents, and provided false information involving his advisor activities to investors and to regulators.”

The SEC was under fire before Madoff’s fraud came to light. The collapses of investment banks Bear Stearns and Lehman this year tarnished the SEC’s reputation and lawmakers such as Dodd and Senator Charles Grassley, an Iowa Republican, have questioned its vigilance in enforcing securities laws. Cox, a Republican appointed by President George W. Bush, has said he will leave office at the end of the Bush administration. His term officially ends in June 2009.

No Inspections

SEC Inspector General H. David Kotz released reports this year critical of the agency’s conduct. He said in one that the SEC “failed to carry out its oversight” of Bear Stearns, the New York investment bank that faced collapse in March. He’s also questioned the handling of investigations by the agency’s enforcement staff.

The SEC hadn’t inspected Madoff’s investment advisory business since he registered the firm with the agency in September 2006, two people familiar with the matter said. The SEC tries to inspect advisers at least every five years and to scrutinize new firms in their first year of registration, former agency officials and securities lawyers said.

SEC examiners reviewed Madoff’s brokerage business in 2005 after an investment manager, writing to the agency, and press reports questioned the validity of his investment returns. The SEC’s enforcement division completed an investigation involving the company last year without bringing a claim.