Should the SEC Be Rewarded for Incompetence?

In a column for the Washington Times, my Cato colleague Richard Rahn uses the Securities and Exchange Commission as an example of a government agency that fails to perform its core mission and then uses that failure to seek a bigger budget.

The budget for the Securities and Exchange Commission (SEC) grew tenfold (to more than $1 billion) in the past 25 years, but there is no evidence it has made us any safer from financial fraud. In fact, the opposite seems to be the case. The Madoff Ponzi scheme was the biggest financial fraud ever. Yet when knowledgeable people presented evidence of the Madoff scheme to the SEC, they were just blown off. Now the SEC wants a bigger budget as a reward for its failure, and the agency and members of Congress are demanding more power for the SEC. The United States has many laws against financial fraud, so that is not the problem. The problem may be - in addition to SEC incompetence - that the public assumes the SEC is looking out for it and consequently fails to do proper due diligence. In other words, the existence of the SEC may be increasing rather than diminishing risk.

The more profound issue, which Richard also addresses, is whether the very existence of bureaucracies such as the SEC results in more fraud and financial turmoil. Or, let's flip the question: Is there any evidence that the SEC (or other bureaucracies) have made a positive difference? The answer isn't necessarily no, but it sure would be nice to see any peer-reviewed evidence that the answer is yes.

Poliitcally Correct Agenda at the SEC Is Misguided, but It Demonstrates Why Democrats Are Smarter than Republicans

It's almost amusing to see the Securities and Exchange Commission jumping on the sinking ship of global warming alarmism. After all, only a government bureaucracy would take such a step at precisely the moment that the scam has been exposed. But I said it's "almost amusing" because the added costs imposed on companies will be real, and this will hurt workers, shareholders, and consumers. But I will tip my proverbial hat to the Democrats. I remember several years ago trying to get the SEC to give shareholders more accurate information by having dividend checks show that corporate tax already was paid on the money. This would help people realize, of course, that declaring dividend income on personal tax returns was a punitive form of double taxation. Yet even though this was squarely in the SEC's mission of supposedly serving investors, the Republicans in charge were politely dismissive. The moment Democrats get in charge, however, they move forward with a politically-motivated change that has nothing to do with helping investors. This is a good example of the old saying that Republicans are the stupid party and Democrats are the evil party:

A politically divided Securities and Exchange Commission voted on Wednesday to make clear when companies must provide information to investors about the business risks associated with climate change. The commission, in a 3 to 2 vote, decided to require that companies disclose in their public filings the impact of climate change on their businesses -- from new regulations or legislation they may face domestically or abroad to potential changes in economic trends or physical risks to a company. Chairman Mary L. Schapiro and the two Democrats on the commission supported the new requirements, while the two Republicans vehemently opposed them. "I can only conclude that the purpose of this release is to place the imprimatur of the commission on the agenda of the social and environmental policy lobby, an agenda that falls outside of our expertise and beyond our fundamental mission of investor protection," Republican commissioner Kathleen L. Casey said.