Tall Order for US Bank Watchdogs; New Broom: Barack Obama Unveils Mary Schapiro as His Wall Street Watchdog Yesterday
Byline: Sam Fleming
BRITISH MPs have repeatedly excoriated the Financial Services Authority for allowing Northern Rock and its competitors to steam into icebergs.
But it is easy to forget that the FSA's regulatory cousins across the Atlantic have presided over a fair few financial mishaps of their own.
First Bear Stearns, then Lehman Brothers and now an alleged $50bn fraud by hedge fund supreme Bernard Madoff - Wall Street's watchdogs have had a dismal 2008.
Indeed, the Madoff fiasco appears to encapsulate the very worst of America's hapless regulatory system.
The Securities and Exchange Commission admitted this week it was repeatedly tipped off about the broker's business dealings. And it failed to respond to 'credible and specific' allegations dating back to 1999.
This came after the SEC was lashed for its handling of Bear Stearns, the investment bank that toppled in March, as well as collapsed former giant Lehman Brothers.
And it comes hard on the heels of the sub-prime scandal, in which the great and good including former Federal Reserve chairman Alan Greenspan stood by while rapacious bankers flogged mortgages to people who could never afford to pay them back.
With America's entire financial services infrastructure collapsing to earth, there are intensifying calls for a regulatory backlash as farreaching as the overhaul that followed the Great Crash of 1929.
So upgrading America's army of regulators is fast emerging as a key priority for Barack Obama and the resurgent Democratic Party in Congress.
George Magnus, chief economic adviser to UBS, said: 'The shock of what has happened over these last couple of years has penetrated the political spectrum in a very, very profound way - and it will be with us for many years to come.' One of Obama's more significant acts was yesterday's appointment of Mary Schapiro as the new SEC head. She is seen as a tough and politically independent operator, who will have a massive job on her hands.
Schapiro had a bumpy start after it emerged that she hired one of Madoff's sons to a financial disciplinary council in 2001. Mark Madoff has emphatically denied any involvement in his father's alleged activities.
Schapiro's bigger headache will be restoring the SEC's tattered reputation. The body's future role is in some doubt, with some officials speculating that it will be sidelined by an increasingly powerful Federal Reserve.
The appointment of former New York Fed chief Tim Geithner as Obama's Treasury Secretary will only enhance the central bank's prospects as a potential super-regulator. …