Posted by AzBlueMeanie:
I have been to many committee hearings over the years, but I have never witnessed anything as riveting and informative as what transpired before the House Financial Services Subcommittee on Wednesday. Wow!
Former investment manager Harry Markopolos, who investigated investment adviser Bernard Madoff for some 9 years, testified before the committee about his experiences with the Securities and Exchange Commission (SEC) in trying to bring Bernard Madoff to justice.
Mr. Markopolos makes some stunning allegations about the Ponzi Scheme of Bernie Madoff. Mr. Markopolos pointedly refers to Wall Street investment bankers as "predators," and suggests that Madoff is just the tip of the iceberg. He bluntly asserts that 30 years of deregulation of the financial services industry is responsible for our current financial crisis. Congress has fostered and permitted an unregulated "shadow banking" system to emerge, trading in extremely complex exotic investments that no one really understands (especially the regulatory agencies), and as Mr. Markopolos correctly notes, criminals tend to congregate in the shadows. He recommends it is time to shine a bright light of transparency on these unregulated markets by bringing them within the regulatory framework.
But it gets worse, much worse. New regulations alone are not going to solve this problem. Mr. Markopolos details how the regulatory agencies that are supposed to be the government watchdogs who protect us from the unscrupulous conduct of these predators have been gutted over the years of experienced staff and funding to conduct investigations. He asserts that the regulatory agencies have been entirely coopted as "captive agencies" of the very industries that they are supposed to regulate, and now serve as enablers for these white collar criminals on Wall Street. The SEC informed him that "we don't investigate" the big boys when he handed the Madoff case to them on a silver platter.
If you want to understand what is really going on and what went so horribly wrong with our financial system, this is "must see TV." All of the major television networks should be required to simultaneously rebroadcast this testimony as a public service to educate the American people.
You can watch the entire hearing at C-SPAN Video Player – House Financial Services Hearing on Madoff Investigation (4 hr, 39 min), which includes the testimony of the corrupt SEC officials whom Mr. Markopolos pointedly criticized in his testimony. The congressional panel came down hard on these individuals.
Here is a video clip of the opening statement of Harry Markopolos:
President Obama, I have three recommendations to make to you:
First, withdraw your inexplicable nomination of conservative ideologue Sen. Judd Gregg (R-NH) for Commerce Secretary (he has been a foot soldier in the deregulation of the financial services industry – he is part of the problem, not the solution). Several congressmen asked Mr. Markopolos if he would be willing to serve as chair of the SEC. Appoint Mr. Markopolos to Commerce Secretary to oversee the overhaul of all the regulatory agencies and to put the fear of God into the white collar criminals on Wall Street. Restore the watchdog role of these regulatory agencies by incentivizing aggressive investigations, whistelblower protections, and private attorneys general enforcement actions.
Second, request that Congress authorize a new Office of Special Prosecutor which will have unfettered subpoena power to conduct investigations into these predatory financial institutions. They are insolvent but for the taxpayer bailout money that keeps them afloat – the American people now own these financial institutions. We have the right to demand to review their books and all documentation and communications, and to compel testimony from witnesses when necessary. A few show trials of high profile Wall Street pirates will send the message loud and clear that this criminal conduct will no longer be tolerated by a civilized society.
And finally, it is time to reimpose the "firewall" regulatory protections that served us so well from the New Deal by repealing the Gramm-Leach-Bliley Act (1999) and adopting a modern version of the Glass-Steagall Act (1933). Then begins the hard work of figuring out how the financial system can be drained of all the toxic debt that was created by the various Ponzi Schemes of exotic investments that various acts of Congress unwittingly authorized. The current financial reforms under discussion by your administration do not begin to address unraveling the mess that Congress created when it deregulated the financial services industry. As long as these laws remain on the books we cannot begin to unravel this problem.