2009-01-05 How the SEC Can Prevent More Madoffs/Woozle

Levitt may be, as one commenter suggested, singing my song -- but with a different ending: his proposed solution is to revive the Office of Risk Assessment within the SEC. While that may help, I don't see how it really changes the equation; it's just shuffling people around, unless he's proposing expanding the SEC.

I'm not necessarily opposed to expanding the SEC, but I should think conservatives (such as the person who suggested that Levitt was agreeing with my suggestion) would be against it... and it seems to me that a much more effective way to spend money, if you're going to spend it, would be to impose technological transparency via the requirement that all businesses (over a certain size, perhaps) deliver their financial data in a common file format. The main cost would be that you'd probably need a new SEC Office of Digital Data:

• to help software companies modify their products to produce data in compliance with the new format (and to certify its compliance)
• to be the SEC's in-house experts for understanding the data submitted by companies -- so if a non-technical person within the SEC wants to ask a specific question (like, "of the funds which have passed through this account, where did most of them come from and where are they now?"), there would be (technical) people who would know how to find it.

Levitt has been criticized for being lax on regulations (e.g. he approved some exemptions for Enron, which prevented the Enron situation from being exposed sooner), so I'm not sure how seriously one should take this seeming reversal towards better regulatory enforcement. It smacks of a diversionary move. He can hardly come out and say "no, we don't need better regulatory enforcement" post-Madoff, so instead he agrees that it's needed but then proposes a fix which won't really change anything.

--Woozle 18:00, 5 January 2009 (UTC)