Legislators Split Case Madoff Roots, Lessons

 

Thursday, Mar 05,2009, 1:26:00 PM   Click:

Legislators Split Case Madoff Roots, Lessons

Emily Flitter



WASHINGTON - The scandal Madoff Investment Securities LLC Monday triggered a fight between legislators whether more regulation might have helped to discover the alleged fraud, or if the regulation failed to use the authority they already had.

The debate was largely along partisan lines, with Democrats arguing for an increase in resources of the Securities and Exchange Commission to detect and fight against fraud and Republicans say the scandal has discredited the agency .

At a subcommittee hearing, House Financial Services Committee Chairman Barney Frank said that if the manager Bernie Madoff is accused of directing a Ponzi system where high-net investors have lost billions, showed more regulation was necessary.

"There were arguments ... that investor protection would be limited to persons of low income, "said Rep. Frank, noting many hedge funds require individuals to invest at least $ 1 million. "This is not simply people who have less than $ 1 million to invest in need of protection."

Payment can be designed so as not to stifle innovation in the hedge fund industry, he said. "The regulation is very good pro-market."

The hearing, which was asked to show how Madoff scandal revealed the need for regulatory reform, deconcentration in favor of a finger.

Both Rep. Frank and Rep. Paul Kanjorski, D-Pa. The President of the House Financial Services Capital Markets Subcommittee, has argued that the Democrats have been pushing to increase the delivery capacity to the SEC in the past, to be pushed by Republicans. But Rep. Spencer Bachus, the Republican head of the Committee on Financial Services, said the SEC has gone beyond the problems of financing. The agency did not use existing resources, he said, and the creation of a new regulation would not necessarily help.

"While the failures of regulation and the private sector due diligence Madoff incurred by the subject are obvious, they do lead me to conclude at this stage of the investigation than what is needed are vast new legislative mandates or regulations on the rest the securities industry, "Rep. Bachus said." What we May Madoff the case is not necessarily a lack of enforcement and monitoring tools, but a failure to use them. "

He was supported by Rep. Scott Garrett, RN.J., who said: "Regulators have many opportunities to learn about the system."

Their disgust with the SEC was shared by some Democrats.

"Many of us have lost confidence in the SEC," said Rep. Carolyn Maloney, DN.Y., and the lack of whistleblower complaints is "pretty pathetic".

She asked a witness during the hearing: "For those who do not trust the SEC addition, this additional authority should be given to other regulatory agencies? Where can I go for surveillance I do not think we have received from the SEC.

Rep. David Scott, D-Ga., Agreed that there is "a credibility problem with the SEC."

The hearing is intended to launch a week of conference efforts on issues related to financial services. But a hearing scheduled for Wednesday on the control of the Troubled Asset Relief Program has been postponed sine die.

The hearing was scheduled for as President of the Board of the Federal Reserve Ben Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair and the means of the Treasury Department should use the remaining $ 350 billion.

The committee is still scheduled to hold a hearing Friday to discuss Federal Housing Administration loan originations. The witnesses have not been announced.