Project for Philosophical Evaluations of the Economy |
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Be fair with the SEC
Bullet points, first drafted on December 19, published on December 30, 2008
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An outraged public is now asking itself, how it could possibly happen that the SEC did not detect the massive
fraud that for several years was being committed by ex-NASDAQ President Bernard L. Madoff and his investment
company. And to prevent the befuddled audience from being unjustly harsh with the poor souls that make up the
SEC, Noah denkt™ would like to bring to its attention the following points:
Conclusion: Shit happens, and no one is and will ever be immune from that. And because that is the way it is, it is
bordering on the irresponsible to suggest that a better supervisory system would be able to spare us the type of
scandals that we are witnessing now. After all, the management of social issues can never be entirely system
managed. And so it is wrong to approach the matter with an administrative and engineering mind only. For too
little does this attitude take into account the need for a continuous critical, independent and emancipated
thinking, that it could now still foster that.
No, if we want to be honest here, we have to accept that the utopia of a perfect system is just that. And so we
should not even try to create a false sense of security now.
Bullet points, first drafted on December 19, published on December 30, 2008
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- “Aportará nuevas ideas y un espíritu para que estafas como las de Madoff no ocurran de
nuevo” (Mary Schapiro, at her presentation as the new president of the SEC by President-elect
Obama, according to “El País”del 19 de diciembre 2008)
An outraged public is now asking itself, how it could possibly happen that the SEC did not detect the massive
fraud that for several years was being committed by ex-NASDAQ President Bernard L. Madoff and his investment
company. And to prevent the befuddled audience from being unjustly harsh with the poor souls that make up the
SEC, Noah denkt™ would like to bring to its attention the following points:
- The SEC is not the only institution that failed to uncover the criminal manipulations that Mr. Madoff was
perpetrating. Apart from the federal authorities, even respected auditing companies such as PWC and
BDO, custodians like the HSBC, NASDAQ board members, the financial press and Mr. Madoff’s own sons,
who by the way acted as directors and associates in their dad´s securities firm, did not detect the
wrongdoings that were going on under their noses. - Part of the problem of monitoring and supervising agencies, particularly in the financial sector is that they
have to rely in no small measure on circumstantial evidence in order to develop their cases and suspicions. - This circumstantial evidence, however, is prone to fall victim to standard prestige and status
considerations. In other words, anyone who understands how much appearances matter in the discovery of
circumstantial evidence can also manipulate this appearance to such extent that it makes him next to
untouchable in the eyes of your standard investigator. - In this respect, it must have been a huge bonus for Mr. Madoff’s apparent trustworthiness that not only did
he belong to the first tier of Wall Street representatives, but that he could also boast of a supreme
(professional and institutional) client base, and that he had exquisite connections into the New York and
Washington establishment. - You also have to keep in mind that the SEC has to supervise an inordinate amount of companies and
organizations. In this respect, it is not too far fetched to compare the SEC’s remit with that of customs
agents who day in and day out are supposed to keep a safe track of the overwhelming multitude of
containers that enter the national ports. - Additionally, you have to keep in mind that tax payers constantly complain of the amount of taxes that they
have to pay. And so it is only natural, that all government agencies try to cut corners when it comes to
keeping their expenses under control. (Remember, for instance, how long it took the military to equip their
humvees in Iraq with anti-IED protection devices.) - Furthermore, you have to keep in mind that there is a constant rant against government bureaucrats going
on in the general public. Surely that does not help the individual investigator to strength his resolve in
fighting glitzy Wall Street institutions. - Then you have to keep in mind, that in their never ending quest to appear active and on top of things,
politicians like to pass a multitude of initiatives and laws that only marginally take into account the question
as to whether these provisions can actually be practically enforced and supervised. Much rather is it quite
likely that the SEC was so burdened with internal reporting requirements that they could hardly recruit
enough interns to tale care of their original task. - You should also not forget, that like you and me, the SEC is made up of human beings who in each case
have their own multitude of private postmodern conflicts (weight management concerns, gym appointments,
dysfunctional love relationships, family hiccups, personal career planning requirements, health recovery
issues, social status aspirations, networking duties, software bugs, spleens, mobbing scares, sexual
rivalries, harassment suspicions, apartment searches etc…) to resolve. In other words, SEC employees too
are straddled with a huge amount of zany social expectations that are eating considerably into the mental
resources that they have available for servicing their professional duties. (In this respect see also our “Sex in the
City” comment). - Additionally, you should always bear in mind that, when having to judge the sad performance of others that
even the CIA was not able to foresee the Iranian revolution, the fall of the Soviet Union, Pakistan’s
acquiring of the nuclear bomb and, let alone, the attacks on 9/11 - Do also not forget that errors and bad performance are not confined to the public sector only. .After all, it
were highly-paid investment bank CEOs who leveraged their companies to such an extent that their
business model has entirely disappeared by now. - And finally, do not forget that even war hero John McCain screwed it up when he designated Sarah Palin as
his Vice Presidential running mate.
Conclusion: Shit happens, and no one is and will ever be immune from that. And because that is the way it is, it is
bordering on the irresponsible to suggest that a better supervisory system would be able to spare us the type of
scandals that we are witnessing now. After all, the management of social issues can never be entirely system
managed. And so it is wrong to approach the matter with an administrative and engineering mind only. For too
little does this attitude take into account the need for a continuous critical, independent and emancipated
thinking, that it could now still foster that.
No, if we want to be honest here, we have to accept that the utopia of a perfect system is just that. And so we
should not even try to create a false sense of security now.
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