Public Watchdogs Ogle Privates

Regulators too busy browsing pornsites to catch Madoff.

The New York Daily News tells us on what's really going on in government agencies who're supposed to guard our financial markets against fraud, deceit, and the next boom-and-bust cycle:

The country's top financial watchdogs turned out to be horndogs who spent hours gawking at porn Web sites as the economy teetered on the brink, according to a memo released Thursday night.

The shocking findings include Securities and Exchange Commission senior staffers using government computers to browse for booty and an accountant who tried to access the raunchy sites 16,000 times in one month[emphasis added]

From the beginning of the Bernie Madoff scandal, people wondered why the SEC investigators hadn't caught him years ago.  We now know that our public employees found something much more interesting to do than scan reams and reams of financial data in order to carry out the duties for which we taxpayers pay them:

Seventeen of the randy employees were "at a senior level" earning salaries of up to $222,418.

If the higher-ups at the SEC set that sort of example, what are the underlings going to do?  With this sort of financial monitoring system in place, any fraud the SEC finds will be the result of a lucky accident.

Government Regulation Simply Doesn't Work

Watching regulatory agencies fail in their duties is nothing new.  The people responsible for aviation safety haven't updated their rules about the instruments that measure aircraft speed since 1947.  In any business, employees who spend their employer's time on porn sites get fired; technical employees who let their standards lapse for more than 50 years would get canned, too.

After the recent methane explosion at the Massey coal mine in which miners were killed, it was revealed that a) the mine inspectors had found problems with the air circulation systems in the mine which were supposed to remove the methane but b) the citations against the mine were being appealed.  The appeals process was put in place by the 2006 Mine Improvement and New Emergency Response Act (MINER).

MINER defined so many new regulations that the mine owners insisted on an appeals process so that they could keep operating after a citation, otherwise every mine in the country would spend half its time shut down and they'd all go bankrupt.  The appeals rate tripled after the new law was passed.

Did the extra regulations make mining safer?  Obviously not.  By adding so many unnecessary regulations that the mine owners got the right to appeal them, the new law buried meaningful regulations such as maintaining the air circulation equipment under a host of unnecessary rules.  The new law made mining less safe than before - and at greater expense for everybody but the lawyers.

Government Can't Regulate Complex Matters Like Medicine

The New York Times reports that 40 percent of all advanced clinical trials sponsored by the National Cancer Institute are never completed.  These trials involve more than 14,000 researchers and 25,000 patients, but nearly half of the researchers and patients are wasting their time and our money when the trials fail.

Part of the problem is that it can take 2.5 years to get a trial approved because there are so many layers of bureaucracy involved and so many overlapping committees.  By that time, the treatments being tested are likely to be rendered out of date by the march of science proceeding in the meantime.  Patients and doctors won't want to test obsolete treatments, but the extra time makes a lot of work for bureaucrats whenever they're able to tear themselves away from other amusements.

Science News agrees that there are problems with how our bureaucracies manage "research":

"The dividends from tens of billions of dollars of investment in research are lost every year because of correctable problems." And while their analysis focused on problems with clinical trials, they said "we believe it is reasonable to assume that the problems also apply to other types of research."

The people who voted to pass Obamacare seem to have a child-like faith in the ability of government agencies to manage complex matters such as our economy, our banking system, and now our health-care system:

The need for improvement looms especially large now that the Obama administration is pouring substantial sums into "comparative effectiveness research." That is essential to helping doctors determine which treatments work well and which do not - and holding down the cost of medical care.

Unless the bureaucracy can be reformed, the Obamacare initiatives to identify effective medical treatments will bog down in the same morass which has retarded progress in cancer research ever since President Nixon declared war on cancer back in 1971.

Government Can't Regulate Buildings Either

Government failure to manage medical research is based on the all-too-human tendency of bureaucrats to defend turf regardless of getting anything done.  In addition to the nonfeasance at the SEC, there's also plain old malfeasance.  The New York Times reports:

A safety inspector licensed to make critical assessments of asbestos and lead risks in buildings and at construction sites across the city made a stunning admission in federal court: Despite filing hundreds of reports saying his tests had found no danger, he had not performed a single one of the tests...

The breadth of his crimes, the simplicity of the schemes and the apparent ease with which he got away with them over the years also suggest that the city's oversight is strained, at best[emphasis added]

The Times is too strong an advocate for any and all government involvement to point out the real problem, but they retain enough journalistic honesty to speculate on what might have happened:

Officials say substantial sums of money could have been saved by allowing the demolition of buildings without performing expensive asbestos abatement.

How about that!  Will wonders never cease?  The Times actually admitted that regulations give government employees the opportunity to collect money on the side.

This isn't news; one of Mr. Obama's senior appointees was disqualified for taking bribes from building owners.  Not only that, responsibility for inspections is divided among a fractured mosaic of overlapping bureaucracies, just as the Times has reported in the National Cancer Institute.  As one would expect, the agencies involved are asking for more money to spend.

h3>Cancer Only Affects Lives; The SEC Concerns Money

The SEC "investigators" missed whatever abuse and/or fraud was leading us into the Obama depression because they were occupied with other matters.  In their haste to exonerate any and all Democrats from blame for the depression, the American media have failed to tell us what really happened - government agencies shoveled mortgage money to people who couldn't pay the loans and government regulators ignored what was going on in the markets.

The Obama depression wasn't caused by lack of regulation, it was caused by fundamental failures in the regulatory process itself.  If we can't fire regulators who refuse to do their jobs, what reason have we to believe that new regulations will have any positive effect?

In a rational universe, the SEC would have its budget cut for malfeasance, but instead, the administration is asking that the regulatory bureaucrats be given more power and more budget.  As with all things government, the worse job they do, the more money they get - the CIA budget got a huge boost after they missed 9-11, and nobody even said "Boo!" to them after their false assertions that Iran had abandoned its nuclear program, to name but two examples of well-rewarded governmental failure.

To get back to the pornography hounds at the SEC, Congress is even now debating how to write more regulations so the Obama depression won't repeat itself.  Unless they clean house, unless they make it possible to fire government employees who'd rather do their own thing than do what they're paid to do, even well-considered regulations will have no effect other than to increase campaign contributions to senators and members of Congress.

It's hard to believe that our leaders are so dumb that they don't know that their past efforts at reform via regulation have failed utterly.  Is creating more opportunities to elicit campaign contributions and hiring more government workers who're inclined to vote for Democrats the whole point of the exercise?

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Bureaucracy.
Reader Comments
The Times is certainly convinced that more regulation is the answer to regulatory failures. They just won't get it through their heads that it won't work.

New York City's Inspection Scandal
The Bloomberg administration may need to revisit its oversight procedures after a building inspector got away with filing hundreds of false reports for years.

New Yorkers are rightly alarmed at the ease with which an inspector who was licensed to test buildings and construction sites for lead or asbestos risks got away with filing hundreds of false reports for at least a decade. The Bloomberg administration says reforms that were already in progress when the deception was uncovered will make it less likely to happen in the future.

But the jaw-dropping scope of the fraud carried out by just one inspector raises legitimate concerns about city oversight. It also raises the possibility of collusion between builders and property owners and the inspectors they hire to perform legally required safety tests.

The inspector, Saverio Todaro, who was at one point certified by city, state and federal agencies, operated a company through which he claimed to perform environmental inspection and testing services, including lead clearance testing, asbestos air monitoring and asbestos inspection in the New York City area. Favorable reports allow property owners to certify that their apartments presented no lead risks to young children or that proposed demolition projects would be asbestos-free. That means they do not require special filings with the city or costly abatement efforts.
April 29, 2010 5:38 PM
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