You might think that after missing the Bernard Madoff scandal despite repeated warnings, going soft on the big banks and other questionable decisions, the Securities and Exchange Commission couldn’t get any more embarrassed.
You would be wrong.
By now you know just how lax federal authorities have been in holding any of the too big to fail bankers accountable for our economic meltdown.
The chief culprits in looking the other way on financial fraud are the Justice Department and the Securities and Exchange Commission.
But never fear, the Justice Department has leaped into action – to investigate the SEC itself for possible fraud!
Even if it doesn’t turn out to be actual criminal fraud, the mess the SEC got itself into is likely to undermine whatever remaining shred of confidence you’ve got in the troubled financial regulator and undermine its credibility.
The SEC’s latest debacle stems not from one of its investigations but from some internal agency business. It seems that agency officials signed a $557 million lease for office space it didn’t need and couldn’t afford in downtown Washington D.C. – without competitive bidding.
Among the gory details: the agency’s chief, Mary Schapiro, apparently approved the lease in a 10-minute meeting without asking any questions. Also, the agency’s inspector general found that a key document justifying the lease was dated a couple of days after the lease was made, but was actually created a month later.
When the SEC realized the Congress wasn’t going to fund it at the optimistic levels the agency had projected, SEC officials tried to back out of the lease and the owner of the office space demanded $94 million in damages.
Of course, congressional Republicans couldn’t be happier to find such ineptitude on the part of top Obama administration officials.
For Schapiro, the leasing fiasco is only the latest to raise serious questions about her leadership and judgment. Earlier, when the SEC finally did get on then Madoff case, she allowed the SEC general counsel to make crucial recommendations to increase how much Madoff’s victims would be compensated – even though the general counsel’s mother was among the victims. Schapiro told a congressional hearing that she knew of the general counsel’s personal Madoff link but allowed him to stay on the case.
When he appointed Schapiro in December 2008, President Obama praised her as “smart and tough.” She may well be. But in her performance at the SEC, she hasn't demonstrated it.
If President Obama wants to continue to signal that he’s in bed with the big banks, that he’s clueless when it comes to the notions of accountability and government ethics, and that government actually is just a cesspool of waste and incompetence, he should hang on tight to Schapiro.
But if he doesn’t, he should sack her immediately and find somebody who can do the job.