Saturday, April 12, 2008
Toothless, Craven SEC
"Not long ago the market police at the [SEC] gave JPMorgan Chase the Wall Street equivalent of a traffic ticket. The penalty: $25 million. But the agency's commissioners overruled their Wall Street enforcers, calling the judgment too harsh. The agency recently lowered the bank's bill to $2 million--less than one-tenth the amount that the enforcement staff initially recommended. To some inside and outside the S.E.C., the case, and others like it, underscores a worrying development: The nation's market watchdog, its critics say, is losing its bite. ... But with the recent financial crisis, which many call the worst since the Depression, critics wonder whether the S.E.C. has given in to the push to lighten up. 'There has been less emphasis on investor protection and more on this issue of the competitiveness of markets,' said Senator Jack Reed, Democrat of Rhode Island. In March, Senator Reed and Senator Christopher J. Dodd, Democrat of Connecticut, asked the Government Accountability Office to look into the penalties that the S.E.C. has been levying lately. Penalties, together with the return of ill-gotten gains, fell by half in the 2007 fiscal year to $1.6 billion. ... The percentage of employees who leave annually rose to 8.6 percent in 2007, the highest level in five years, from 7.5 percent in 2005, when Mr. Cox arrived. ... Staff levels are down and falling. The S.E.C. budgeted for 1,093 enforcement jobs in 2009, down from 1,232 full-time enforcement employees in 2005. ... But since Christopher Cox, a former Republican congressman from California, took over as chairman in 2005, spending on enforcement has fallen from $316.3 million to $298 million in 2007. 'What Cox has done is to pull state patrolmen off the highways and shackle them in one way or another in a parking lot,' said Lynn E. Turner, who served as the S.E.C.'s chief accountant from 1998 to 2001. ... But enforcement staff have argued that other policies have hampered their ability to bring tough cases. ... Now, under a pilot program, the commission requires a majority of commissioners to approve a range for settlements. Some staff members complain that this makes them feel as if they must get permission to do their jobs. ... Cox responded to Senator Dodd's inquiry on April 1, pointing out that in the fiscal year ended 2007, the S.E.C. brought the largest number of corporate penalty cases in its history", my emphasis, Jenny Anderson (JA) at http://www.nytimes.com/, 8 April 2008.
Losing? Lost, years ago. Why did Bush install Christopher Cox (CC) as SEC head? Must we still guess? Welcome aboard, JA. Well Walter Riccardi, what will you do about this? Will you have the decency to resign and find something else to do? See my 1 April 2008 post. In my opinion, the Harvey Pitt SEC was the most venal I encountered in my professional career, the CC SEC is the most incompetent and cowardly. $2 million for JPMorgan and $8.4 million for Joseph Jett (JJ)? How many billions is JJ's net worth? See my 12 September 2007 post. JPMorgan's market cap is $144 billion. Imagine, the SEC's fine was .000014 of JPMorgan's market cap. I'm sure this fine will deter JPMorgan from future misadventures.