The final nail in the coffin of laissez faire capitalism

If there were still any defenders of laissez faire capitalism, the downfall of Bernard Badoff should silence them for good. The list of Madoff casualties is astonishing -- Steven Spielberg's Wunderkind foundation, the Elie Wiesel foundation, even Fred Wilpon, owner of the New York Mets, lost $300 million. I haven't paid the attention to this that perhaps I should have; deadlines and 7 AM conference calls will do that to a person.

On the other hand, regulation only works if it actually takes place. If the agencies decide to look the other way when crooks like Madoff are operating, regulation exists in name only.

When the book is written on the Bush years, the recurring theme will be one of looking the other way at warnings of danger. We all know about how George W. Bush snapped "OK, you've covered your ass now" at a CIA agent who dared to interrupt the Dim Dauphin's vacation to deliver the now-infamous August 6 Presidential Daily Briefing about Osama Bin Laden's plan to attack the US. Now it seems that the SEC had ample warning of what Madoff was doing -- and did nothing:

The Securities and Exchange Commission said Tuesday night that it had missed repeated opportunities to discover what may be the largest financial fraud in history, a Ponzi scheme whose losses could run as high as $50 billion.

The commission said it received credible allegations about the scheme at least nine years ago and will immediately open an internal investigation to examine why it had failed to pursue them aggressively.

The S.E.C. issued the statement hours after Bernard L. Madoff, the 70-year-old Wall Street executive accused of operating the scheme, discussed the fraud with federal authorities at a meeting in New York on Tuesday, according to people briefed on the meeting.

“Our initial findings have been deeply troubling,” Christopher Cox, the S.E.C. chairman, said in his statement. The commission received “credible and specific allegations regarding Mr. Madoff’s financial wrongdoing,” but did not respond aggressively, he said.

“I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them,” Mr. Cox said.

As long as people were making money, no one cared that this was a Ponzi scheme. Now all of a sudden, they're shocked and appalled. When are the defenders of the "invisible hand" going to realize that basic human greed trumps all?