WASHINGTON — Republican and Democratic House members said Monday that the alleged $50 billion fraud involving Wall Street figure Bernard Madoff reflects deep, systemic problems at the Securities and Exchange Commission.
Inspector General H. David Kotz said he is so concerned about the SEC’s failure to uncover Madoff’s alleged Ponzi scheme that the IG is expanding the inquiry called for last month by SEC Chairman Christopher Cox. Cox had pushed the blame squarely onto the SEC’s career staff for the failure to detect what Madoff was doing.
At the first congressional hearing on the scandal, Rep. Spencer Bachus, R-Ala., called for Congress to create a regulatory structure “for the 21st century.” The House Financial Services Committee is trying to determine how, despite warnings back to at least 1999 to SEC staff members, Madoff continued to operate his alleged scheme.
“Clearly, our regulatory system . . . failed miserably, and we must rebuild it now,” said Rep. Paul Kanjorski, D-Pa.
Rep. Paul Hodes, D-N.H., said the Madoff scandal is like “the cherry on a bad sundae.”
Kotz said he will examine the operations of the SEC’s enforcement and inspection divisions and will make recommendations beyond what Cox had called for.
Thousands of individuals as well as big hedge funds, international banks and charities around the globe lost money investing with Madoff. A prominent French financier who had trusted his fortune and his clients’ money to Madoff was found dead at his office in New York on Dec. 23, an apparent suicide.
Federal prosecutors said in court Monday that the 70-year- old Madoff violated bail conditions by mailing about $1 million worth of jewelry and other assets to relatives and should be jailed without bail.
Lawmakers, many of whom have received calls from constituents and charities in their districts that lost money, jumped on the opportunity to show concern. The hearing was held on the final day of the current Congress.
Rep. Brad Sherman, D-Calif., insisted that all five SEC commissioners should tender their resignations to President-elect Barack Obama.
Republicans warned against rushing to new regulation as a response to the SEC breakdown.
