Looking For Heads To Roll

According to TPM, the revelations of the Bernie Madoff case has put the SEC in a "state of complete panic" :

The revelation that Bernard Madoff -- who himself had in the past served as an adviser to the SEC on electronic trading -- was running an alleged "$50 billion ponzi scheme" has rocked the SEC to its core, according to a current long-serving member of the commission's enforcement division.

"This has put the agency into a state of complete panic," the SECer told TPMmuckraker in an interview.

The source said that one associate director in the enforcement division had in recent days ordered junior staff to review every case that's been closed over the last few years, to ensure that violations weren't missed -- as they appear to have been in the 2006 investigation of Madoff. "There's a real paranoia around here," the source added.

With a new administration incoming, a new boss in Mary Schapiro who now has to prove she's tough enough to reform the SEC, a vowed plan to overhaul financial regulatory bodies in general and even a plan to combine agencies, the natives are indeed restless. That a lot of heads will roll from the Madoff case is the fear around the water coolers at the SEC, and rightfully so. Considering she's already got one strike against her as being too buddy-buddy with the types of folks she should be regulating after giving a job to Bernie Madoff's son at the regulatory agency she ran before, the axe is going to swing freely and there will be blood in the streets. It'll be a good show.

But in the end the real question is just how much new regulatory pressure Obama and Schapiro will be allowed to bring on Wall Street. My guess is more of the same: regulations barely enforced if at all by a brutally underfunded agency and an administration unwilling to go after the most egregious violators to "avoid hurting what economic growth is left". Schapiro will make a show of it, she has to. But in the end the transfer of wealth away from what's left of the American middle class to the super-wealthy will continue unabated, especially since the super-wealthy have lost trillions in vanished stock market value. They'll want it back. It'll come from us.

Guaranteed. After the sturm und drang, the status quo will roll on.