Thursday's News Seemed Like It Came Right Out Of A Tom Wolfe Novel

 

As if that page 1, column 1 story reported late Wednesday night in The New York Times was not weird enough, the top story in The Times business section reported that a lawyer in the Enforcement Division of the Washington office of the U.S. Securities and Exchange Commission, after seeking protection under federal whistleblower statute, was accusing the agency with illegally destroying files and documents related to thousands of early-stage investigations over the last 20 years.

Old files about the original investigation into Bernard Madoff, Goldman Sachs, Lehman Brothers, Citgroup, Bank of America, The Times reported, were destroyed by the SEC, all in accordance with SEC policy. Files and documents related to 9,000 preliminary investigations that were dead ends were gone.

The Times noted with irony that “The S.E.C. is the very agency that is charged with making sure that Wall Street firms retain records of their own activities, and has brought numerous enforcement cases against firms for failing to do so.”
 
It was right out of Tom Wolfe's Bonfire Of The Vanities.


Not only did the whistleblower’s allegations first get reported in the highly venerated Rolling Stone magazine, but the whistleblower, an SEC staff attorney for 13 years, “said that S.E.C. officials discussed whether to lie about the document destruction because they might be open to criminal liability.”


While the report stopped short of alleging that SEC officials had willfully destroyed government records—a federal crime punishable by up to three years in jail— that possibility was implied.

 

“It is common for S.E.C. employees to leave the agency for the private sector and then begin representing clients before the agency,” said the article by Ed Wyatt. “Mr. Flynn contends that the practice increases the likelihood that S.E.C. investigators could do undetected favors for former colleagues and their clients by quashing investigations.”

In other words, the revolving door that thrust top SEC officials into jobs making millions a year at powerful Wall Street firms -- and that temporarily lands Wall Street executives into prestigious jobs as securities industry regulators at the SEC -- had created a cozy old boy network.

Thursday morning, just before the S&P investigation and SEC whistleblower story were about to make big news, the stock market opened and the Dow Jones Industrial Average plunged more than 500 points in its first hour of trading. Morgan Stanley had issued a report saying chances had risen for a global recession, the dreaded double dip.

 

The worldwide cascade of stock market plunges bumped these scandals from the top news spot on your browser.

S&P, the nation’s largest credit rating agency, was being investigated by the U.S. Government for giving good ratings to billions of dollars of mortgages that were toxic waste and thus helping to cause the financial crisis, and the investigation of S&P was hitting the front page less than two weeks after it had downgraded the U.S. Government for being lousy fiscal managers.

 

Meanwhile, the corruption of Wall Street and the government institution charged with policing it were both being exposed by an SEC lawyer who was scared to come forward without the protection of the federal laws protecting whistleblowers.  

 

But no one was talking about it because the stock market was coming undone again.

Stocks must be nearing a bottom.

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