SEC Head Mary Schapiro Apologizes to Congress for Her Stupidity in Madoff Case

Congress Accepts Apology, For Congress Stupidity is Just too Rampant to be Sanctioned and (Incredibly) WSJ Editorial is Right On

In a side issue in the Bernie Madoff Ponzi scheme saga The Dismal Political Economist reported earlier that the SEC’s General Counsel had actively sought to change the way investors were treated.  It turned out that the full Commission accepted Mr. David Becker’s (the General Counsel of the SEC) recommendation for more generous treatment of the investors not knowing that Mr. Becker was the beneficiary of a $2 million investment with Mr. Madoff and could benefit from the proposal he was making.

The SEC Commissioners were outraged, when they learned of this as well they should have been.  An investigation ensued and it turned out that Mr. Becker was only partly at fault.  He had informed the SEC Chairperson of his conflict and she had not acted on it, had not told anyone and apparently didn’t seem to care.  The head of the ethics department at the SEC reported to Mr. Becker, so that position was rendered impotent in making an ethics judgment in the case.

Mary Schapiro, the head of the SEC testified before the Congress and apologized for her mistake.  Apparently that was all that was needed to exonerate this grievous error in judgment and horrible ethics violation.

Lawmakers said they are troubled by structural problems that enabled Mr. Becker to receive clearance from the SEC's former ethics counsel to work on Madoff matters. But they lauded Ms. Schapiro for admitting that was a mistake.

"What is clear about this situation is that you did make a mistake. You admitted such and you said had you known then what you now know, you would have acted differently," said Rep. Patrick McHenry (R., N.C.).

And Mr. Becker went on to say that he never, ever considered his only personal situation in making a recommendation to the Commission that investors be treated favorably. 

He said he acted truthfully and that he never considered that he would be subject to a clawback suit. To violate a federal conflict-of-interest law, a federal employee must have knowledge that his actions would lead to a direct and predictable impact on his financial interests, he said.

Thus confirming suspicion that Mr. Becker is naïve, stupid, uncomprehending of basic ethics and in all probability “truth challenged”.  Of course in Washington those are qualifications for a high government post.  Mr. Becker has a bright future in government.

In an even more remarkable development in this case, an editorial in the Wall Street Journal took the same position that The Dismal Political Economist took against the actions of Ms. Schapiro and condemned this egregious display of lack of sensitivity to a blatant conflict of interest.  The Dismal Political Economist has often condemned editorials in the Wall Street Journal, and so is happy in this case to commend their thoughtful and intelligent writings on the subject.

So Ms. Schapiro and Mr. Becker please note this.  When you are condemned by the editorial staff of the Wall Street Journal, and when that condemnation is relevant and correct, you have really made a very serious error in judgment and you are very culpable.