The latest revelations about the SEC’s failure to investigate Bernard Madoff’s dealings, despite the red flags raised by a number of people, should not surprise us, given recent and not so recent history. Until recently, Congress was in serious in deregulation mode, and the agency followed the prevailing mood of keeping hands off Wall Street. Let the Masters of the Universe practice their arcane craft without government poking its intrusive nose into the business of making money. We were all getting rich, weren’t we? Sure, there were times when the bubbles would burst, but the market always seemed to recover and zoom to new heights.

Until now. oops.

What worries me is that the failures of the regulators seem to have less to do with their failures than with the willingness of Congress to let Wall Street make its own rules. Even now, the administration is shying away from tightening the rules on the banks, preferring instead to attempt to strengthen the hand of the regulators. This is, I believe, a prescription for future disasters. We’re already seeing executive compensation creeping back up to pre-crash levels. The willingness of bankers to take inordinate risks in order to cash in their mega-millions was at the heart of the economic debacle we’ve just experienced. I can’t help but think that we’re setting the stage for another one.

Topics: crash, economy, Madoff, recession, regulation, SEC, Wall Street