Heck of a Job, Brownie . . .er-r-r Cox

Just a month and a half ago Republican Senator, Chuck Grassley, Republican of Iowa, ranking member on the Senate Finance committee released this letter regarding Securities and Exchange Commission agreement to more oversight of self-regulatory organizations such as the New York Stock Exchange (NYSE).

More expanded reporting of the story at the end of February here. This sentence is particularly interesting

Grassley asked the SEC to explain why its staff has not routinely obtained and reviewed the internal audits and investigations of the organizations, and asked SEC Chairman Christopher Cox to remedy the Commission’s failure to use such investigative resources provided by self-regulatory organizations as part of its work to safeguard the integrity of U.S. markets.

Now I fully realize that there is a difference between a self-regulatory outfit such as the NYSE and Bear Stearns which is was a publicly traded company. But along comes this story by Jesse Westbrook at Bloomberg.com. There would appear to be some disagreement on how good a job the SEC was doing.

Bear Stearns had more than $17 billion in cash and salable assets on March 11, according to the SEC. At the end of last week, the firm’s brokerage units still had enough capital to pay clients who wanted to close accounts, the agency said.

“Criticizing SEC examiners is unfair,” said Robert Neff, a former Bear Stearns risk manager who left the firm in March 2006. “They’ve become every bit as strong and vigilant as the Fed.

Kind makes me wonder how secure the Fed is. But I’ll save that for another day.

I have found that law professors are pretty sharp cookies which make these thoughts from the same story pretty powerful

The SEC and the Fed “are both equally guilty on regulatory blame for being asleep at the switch,” said Anthony Sabino, a business-law professor at St. John’s University in New York and head of Sabino & Sabino, a securities litigation firm.

“The smart move would have been two years ago to tell these firms to shape up, you’re not telling the market enough, you’re gambling too much,” Sabino said, citing the firms’ investment in securities tied to subprime mortgages.

The big questions is “How sharp is Commissioner Adkins?” after the quote at the end of this

In determining whether securities firms have enough capital and access to cash, the SEC conducts on-site examinations of risk-management policies and procedures, according to its Web site. The regulator also reviews “risk reports substantially similar” to ones provided to the firm’s management every month.

Agency staff members meet at least once a month with senior risk managers at securities firms to scrutinize “outsized risk exposures” and once every three months to review how easily assets on the balance sheet can be converted into cash, the SEC said.

The SEC’s oversight of securities firms is “strong,” and Bear Stearns was done in by a run on the bank, not a lack of capital, SEC Commissioner Paul Atkins said.

Heck of a job . . . somebody.

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