Matt Taibbi On The SEC Covering Up Investigations

In Rolling Stone this month, Matt Taibbi takes time off from bashing Tom Friedman (which is really getting too easy now) to allege that the SEC has been destroying it's records. Specifically:

For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Oh, but these must just be investigations that were pointless and never went anywhere, right?

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two [Matters Under Inquiry] involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

Taibbi explains the root of this better than I could:

Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money – a blow from which the agency has never recovered. 

This certainly rings true. Take a spin through the thousands of LDA (Lobbying Disclosure Act) filings, which people and organizations must submit to the House and Senate when they are lobbying the federal government. Lobbyists are requited to indicate if they have previously worked for the federal government or for a congressperson. Having experience with those filings, I can tell you that former SEC employees are not spending their time lobbying the Pentagon. No, they are lobbying the SEC, which is the exact reason they got hired by lobbying firms in the first place.

Corruption is a strong word, but when a system is set up, de facto, so that people know that if they put in a few years with a regulatory agency they will then get employment in the public sector with a pay increase of several magnitudes, a better word does not exist. Sure, there are 'cooling off periods' in between working for a federal agency and lobbying it, but the major financial institutions can well afford to pay someone to sit on their ass for one or two years until that period expires. If we are not going to bother stopping this form of corruption, then we might as well dismiss the charade of regulation. If the SEC is not going to investigate financial malfeasance, and not do anything about its people jumping ship to work for the organizations that they are tasked with monitoring, we can save money on the electrical and heating bills and just shut the agency down.