Matt Taibbi has published yet another serious expose, and this one is appalling in that it shows how long standing and deeply institutionalized the “nothing to see here” practices are engrained at the SEC.
This is the guts of the article:
For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation’s worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – “18,000 … including Madoff,” as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history….
It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases.
Don’t underestimate the seriousness of these charges. The SEC’s own staff has admitted that this behavior may well be criminal, and the agency has responded to inquires with remarkably obfuscatory replies, which is usually a official sign that the facts are ugly.
Not only is this conduct appalling, but the timeline is revealing. It apparently dates to at least 1993, when Clinton appointee Arthur Levitt became chairman. This is well before most people would date Wall Street having much impact on undermining regulation (although if my memory serves me right, a significant first step was the Greenspan Fed abandoning oversight of primary dealers, which took place in 1992). Levitt was from Wall Street, he had been the chairman of the American Stock Exchange. But he has tried to wrap himself in the mantle of being the friend of the small investor and blamed the erosion of the SEC on regular threats by Congressmen like Joe Lieberman, the Senator from Hedgistan, who found this stance to be too much and threatened to cut SEC funding. It isn’t clear if the practice started under Levitt, but Levitt notably was the first SEC chairman for decades who was not an attorney. His history in the industry and his lack of legal expertise was questioned as being likely to weaken the agency, and with the benefit of hindsight, that effort may have been more deliberate and wideranging.
This evidence of an institutionalized effort to change the playing board in favor of the financial services industry puts an entirely different coloration on Levitt’s posture. It now looks like a precursor to the Obama playbook of giving the industry virtually everything it wanted on what counts (Levitt sided with Rubin and Greenspan in opposing regulation of credit default swaps) but engaging in some “friendly to the public” gestures to hide that fact from the Democratic base. And it’s hard to believe now, but in 1993, both the rule of law and propriety carried much more weight than they do now. It’s hard to imagine that those involved were ignorant of the significance of these measures, and the fact that they continued for 20 years before anyone called them out points to a deeply corrupt culture at the SEC.
I’m not easily shocked, but this is shocking. It’s like discovering your a colleague didn’t merely have some problems with his taxes, but was money laundering on behalf of a major drug ring. I hope the Taibbi piece leads to a much broader look into dubious practices at the SEC. But given how the banks seem to own DC, I’m not holding my breath.