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Published: Sunday, 12/21/2008

Foxes, fur, and feathers

THE baring of teeth and flying fur at the Securities and Exchange Commission is intended to signify the seriousness of the federal investigation ordered by SEC chairman Christopher Cox into the $50 billion fraud supposedly perpetrated by investment guru Bernard L. Madoff.

To us, however, Mr. Cox's furious finger-pointing at lower-level SEC employees he claims failed to detect Mr. Madoff's humongous Ponzi scheme is validation of what we wrote in this space in June, 2005, when Mr. Cox, a former Republican congressman from California, was appointed to his job by President Bush.

To reprise, we averred that Mr. Cox "could very well prove to be another in a series of determined predators sent forth from the great white den at 1600 Pennsylvania Avenue to keep a hungry eye on Wall Street coops."

In other words, the fox-guards-henhouse arrangement was one more example of the Bush Administration's generalized jihad against federal regulation.

Now - and here we beg the reader's pardon for yet another animal cliche - Mr. Cox has slammed shut the door on the regulatory barn after the horse has escaped. Instead of placing the responsibility for the lapse on the politically appointed administrators, such as himself, who actually set the tone and direction for the agency, he's blaming the stablehands, the SEC's career staff attorneys.

In particular, Mr. Cox points at one former SEC attorney who was part of a team that is said to have looked into Mr. Madoff's brokerage operation in 1999 and 2004. That attorney married Mr. Madoff's niece in 2007.

Interesting stuff, but if a single SEC attorney can sidetrack an investigation of a fraud as extensive as Mr. Madoff's was said to be, there's something very wrong at the agency. It's far more likely that, if staff regulators turned a blind eye to the Madoff scheme, they were doing exactly what the political masters wanted them to do.

If initial news reports turn out to be correct, Mr. Madoff stole something approaching $50 billion from a long list of investors, including charitable foundations, international banks, and wealthy individuals. These trusting investors got so used to consistently high returns on their money that they neglected to ask - or didn't want to know - how it was possible.

Up and down the East Coast, and especially in South Florida, scores of suddenly poor investors are asking how they could lose so much so fast.

The answer doesn't lie in blaming low-level operatives at the SEC but rather in the sweeping culture of deregulation put in place by the Bush Administration over the past eight years. That's what allowed the chickens to be plucked.



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