Friday, December 20, 2013

Internal Tension in SEC Surrounding Mortgage Investigations

Today, in The New York Times,there is an interesting article describing the internal tensions and conflicts in the Securities and Exchange Commission as it investigated possible wrongdoing by Wall Street power brokers and made decisions about bring cases in connection with the mortgage crisis.
 
While the SEC has brought some significant cases, it has passed up the opportunity to bring charges after several large and important investigations.  In a number of these the Department of Justice or other agencies acted rather than the SEC.  (Another issue not discussed in the article is the fact that the Justice Department has brought civil cases or criminal cases against corporate entities rather than criminal prosecutions of the individuals involved in wrongdoing.  United States District Judge Jed S. Rakoff of the Southern District of New York addressed this issue in an essay for The New York Review of Books, "The Financial Crisis:  Why Have No High-Level Executives Been Prosecuted," January 9, 2014, issue, http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/.)
 
The Times article describes the tension among various SEC players during discussions of bringing cases.  In short, the investigators pushed for the filing of civil enforcement actions while the litigators resisted the filing of a number of cases.  Ultimately, DOJ and other agencies stepped in and brought civil actions against some of the banking entities, achieving penalties and fines in the billions of dollars. 
 
The article is an unusual and informative glimpse into the inner workings of the government's primary regulator of Wall Street.  For the full article, please see the Times, "S.E.C. Tension as It Examined Mortgage Cases," December 19, 2013, http://dealbook.nytimes.com/2013/12/19/s-e-c-discord-as-it-examined-mortgage-cases/?hp.

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