Free Markets, Free People

The Case Against “Not Enough Regulation” Causing Financial Meltdown

The case against?

Bernie Madoff, of course.  A man who bilked investors of some 80 plus billion dollars over a couple of decades knew how to fool the regulators and was not shy about passing on that information to those who worked for him.

Money quote (no pun intended):

“You know, you don’t have to be too brilliant with these guys because you don’t have to be …”

Apparently the regulation regime, which should have easily have caught Madoff, failed too because regulators got to cozy with him:

“The guys . . . ask a zillion different questions and we look at them sometimes and we laugh, and we say, ‘Are you guys writing a book?’ ” he said.

“These guys, they work for five years at the commission then they become a compliance manager at a hedge fund now.”

Yeah – we need more regulations. That’s the ticket. More. That’ll fix it.

The regulations were there – the regulators, however, failed to enforce them. My guess is that a close examination of why we ended up in the financial pickle we did had less to do with the lack of regulation and more to do with what let Bernie Madoff skate for so long – a criminal lack of oversight by regulators as authorized by law.



8 Responses to The Case Against “Not Enough Regulation” Causing Financial Meltdown

  • It’s almost like claiming that you can pay for a program by finding half-a-trillion dollars of waste and inefficiency in a related program, which makes you wonder why they waited so long to decide to eliminate half-a-trillion dollars per year of waste and inefficiency.

    “Yeah, we’ve completely screwed this system up for decades, but next year… and you mark my words… next year we’ll get it right! Just trust us with even more of the money that we’ve always misspent and wasted.”

  • This has always been one of my biggest complaints about ‘more government’ and ‘more laws’. Enforce the laws we have on the books and we’ll at least understand if they do what they are supposed to do.

  • As I recall, there was a whistle-blower early on who testified that the SEC had plenty of warnings over the course of years that Madoff was up to no good, but they were ignored. This fact, of course, has been ignored by politicians and MiniTru, who are intent on using Madoff as an reason for more government regulation (read: more ginning the system to reward some people and penalize others).

  • Politicians don’t like making sure existing laws and regulations work. That’s drudgery. It is much more fun and more rewarding politically and financially to pass, and take credit for, new ones.

  • For the record, Bernie did not bilk 80 plus billion dollars from investors. What he did was invent large numbers that he claimed were in the accounts. He never actually took that much money, he simply pretended that it was there. And the only reason it came apart, like all Pnozi schemes, is because too many people started pulling out money.

  • The SEC twice received a detailed memo describing why Madoff had to be running a ponzi scheme. The memo laid out the basis for why Madoff’s descriptions of his trading strategies could not be true. It provided explanations of trading strategies and trading volumes and performance history of various firms in that business.

    Does anyone really think the regulators understood it?

  • Only with Democrat Party NEWSPEAK do you get a case where the government clearly failed, and failed big, yet the blame goes to a “failure of the free market approach”.

  • Remember, massive regulations are a form of rent seeking by big corporations and other fat cats who detest genuine laissez-faire capitalism.
    Madoff was able to function for so long because these regulators -have- to turn a blind eye to most of these alleged “infractions” in order for the economy to function, despite the fact that simple laws against fraud are all that are needed to identify and prosecute Ponzi schemers. (as they were for Ponzi himself back in the early 1920’s)