The SEC, criticized in recent months for having too many lawyers and not enough analysts as it failed to unearth Bernard Madoff’s Ponzi scheme

TO BE NOTED: From Bloomberg:

‘I Want You,’ Uncle Sam Says to Unemployed Wall Street Analysts

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By Josh Fineman

April 8 (Bloomberg) -- Uncle Sam to Wall Street: I want you.

Underscoring Washington’s appeal as the financial industry shrinks, about 400 finance professionals have signed up for a New York job fair this month featuring nine federal agencies ranging from the Federal Deposit Insurance Corp. to the FBI and the Securities and Exchange Commission. That’s double the tally at similar events last year, organizers say.

Attendees at the April 24 event will include Virginia Donner, 43, who called a friend at the Federal Reserve after losing her job at a hedge fund in Greenwich, Connecticut. “When you’re looking for work and your industry has kind of imploded, you have to look at what your skills are and then figure out who’s hiring,” she said.

The job-seekers are among 23,300 people who lost industry work in New York in the year through February as banks worldwide announced almost $870 billion in losses and writedowns. The credit crisis that claimed Lehman Brothers Holdings Inc., Merrill Lynch & Co. and Bear Stearns Cos. may cost another 23,000 jobs over the next year, New York City estimates.

Unemployed Wall Streeters “are sick of the insecurity,” said William Drawbridge, director of marketing and development at the New York Society of Security Analysts, which is organizing the job fair. “Government jobs are stable jobs. This is a good out for them.”

‘Phenomenal Opportunity’

The SEC, criticized in recent months for having too many lawyers and not enough analysts as it failed to unearth Bernard Madoff’s Ponzi scheme, is in the market, according to Chairman Mary Schapiro.

“We have a phenomenal opportunity right now to bring in much more current and useful skill sets, with people who have lost jobs on Wall Street and are anxious to do something, and do something very constructive,” Schapiro told Congress during a March 11 hearing.

Granted, the government pays less than the banking industry, where associates with three years on the job can earn as much as $120,000 a year, according to Alvin Kressler, executive director of the analysts’ association. About 40 percent of the group’s members earn between $175,000 and $190,000 a year.

A government employee in New York can earn between $76,000 and $153,000, according to the U.S. Office of Personnel Management’s Web site. In Washington, government salaries range from $59,000 to $127,000.

Pay Cuts?

“Nothing pays as well as Wall Street,” said Laura Richardson, 45, who lost her job as an analyst at BB&T Capital Markets in McLean, Virginia, two months ago. At the same time, “there are no long-term guarantees on Wall Street.”

Richardson said she’s considering making the trek to New York for the job fair to seek a government role, seeking a job “to help fix the problem.” She added that she’s ready to do “Whatever I can do to help prevent this from happening again.”

Other local jobs are becoming scarce. New York City had a record month-to-month increase in its unemployment rate in February, climbing to 8.1 percent from 6.9 percent in January, the state Labor Department said last month. The city’s jobless rate was the highest since October 2003, and the financial industry shed 2,700 jobs last month.

New York City will probably have lost 46,000 financial jobs by the second quarter of 2010 from the beginning of 2007, according to the city’s Office of Management and Budget.

“The government does provide some good benefits, a good health program,” said John Palguta, vice president for policy at the Partnership for Public Service. “If anybody is worried that the government may simply not be able to afford them, either they were making well over $200,000 a year or they’re wrong.”

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net"

"Federal officials are bringing far fewer prosecutions as a result of fraudulent stock schemes than they did eight years ago"

Since you know that I think that Fraud, Negligence, Fiduciary Misconduct, and Collusion, are the second most important cause of this crisis, I think you can guess how I feel about this story in the NY Times:

"By ERIC LICHTBLAU

Published: December 24, 2008

WASHINGTON — Federal officials are bringing far fewer prosecutions as a result of fraudulent stock schemes than they did eight years ago, according to new data, raising further questions about whether the Bush administration has been too lax in policing Wall Street.( A MAJOR MISTAKE )

Legal and financial experts say that a loosening of enforcement measures, cutbacks in staffing at the Securities and Exchange Commission, and a shift in resources toward terrorism at the F.B.I. have combined to make the federal government something of a paper tiger in investigating securities crimes. ( A MAJOR CAUSE OF THIS CRISIS )

At a time when the financial news is being dominated by the $50 billion Ponzi scheme that Bernard L. Madoff is accused of running, federal officials are on pace this year to bring the fewest prosecutions for securities fraud since at least 1991, according to the data, compiled by a Syracuse University research group using Justice Department figures.( WHAT A DISGRACE )

There were 133 prosecutions for securities fraud in the first 11 months of this fiscal year. That is down from 437 cases in 2000 and from a high of 513 cases in 2002, when Wall Street scandals from Enron to WorldCom led to a crackdown on corporate crime, the data showed.

At the S.E.C., agency investigations that led to Justice Department prosecutions for securities fraud dropped from 69 in 2000 to just 9 in 2007, a decline of 87 percent, the data showed.

Federal officials took issue with some of the data compiled by the Syracuse group and said that they had maintained a strong commitment to rooting out fraud and abuse in the stock markets. While the S.E.C. could not provide numbers of its own on criminal cases arising from its investigations, Scott Friedstad, the deputy director of enforcement at the commission, said the numbers did not reflect “the reality that I see on the ground.”

“We are as committed as ever to vigorous enforcement efforts,” he said.

But a number of investor advocates and securities lawyers who are critical of the S.E.C.’s recent performance say they will be anxiously watching the incoming Obama administration to see what steps it may take to restore the agency’s battered credibility and re-establish it as a watchdog against corporate abuse.( HEAR HEAR )

President-elect Barack Obama has named Mary Schapiro, head of the Financial Services Regulatory Authority, to lead the S.E.C, and he has promised an overhaul of the agency and other financial regulatory offices to provide tougher oversight.( PLEASE )

“I think the S.E.C. has completely fallen down on the job,” said Jacob H. Zamansky, a New York lawyer who specializes in representing investors who have lost money in fraud cases. “They’re more interested in protecting Wall Street than protecting investors. The new administration has to do a complete overhaul of the S.E.C.” ( A MAJOR CAUSE )

The F.B.I., which frequently investigates stock fraud cases either on its own or in partnership with the S.E.C., has also had a sharp decline in the number of white-collar cases it has brought in the last several years — partly a reflection of a huge shift in staffing and resources to counterterrorism operations since the Sept. 11 attacks, officials said. ( THAT WORKED WELL )

David Burnham, co-director of the Syracuse research group, which is known as the Transactional Records Access Clearinghouse, or TRAC, said the decline in stock fraud prosecutions growing out of the F.B.I. “really is no surprise. It’s a reflection of a choice that was made right after 9-11 to move investigators into terrorism, and this is the cost of that.( COULDN'T DO BOTH. WE NEEDED TO GO TO IRAQ )

“Maybe it’s the correct call,” he added, “but with both the F.B.I. and the S.E.C., the federal government is really the only place that does white-collar crime on a systematic basis.”( YOU HAVE NO IDEA WHERE THIS CRISIS WILL LEAD )

The economic collapse of the last few months has brought intense scrutiny of the S.E.C. amid accusations that it failed to foresee and prevent the collapse of one major financial institution after another as a result of risky overinvestment in mortgage-backed securities.

“As an overheated market needed a strong referee to rein in dangerously risky behavior, the commission too often remained on the sidelines,” Arthur Levitt, who served as chairman of the S.E.C. during the Clinton administration, told the Senate Banking Committee in October.

The Madoff scandal, now under investigation by federal prosecutors in Manhattan, has ratcheted up criticism even further.

Christopher Cox, chairman of the S.E.C., ordered an internal investigation last week into what he said were the agency’s “multiple failures” to investigate credible allegations of wrongdoing by Mr. Madoff.

The S.E.C.’s own data suggests that the agency has put increasing emphasis on using non-criminal means, like civil fines and what are known as deferred prosecution agreements, in dealing with allegations of wrongdoing. The number of S.E.C. cases handled through civil or administrative remedies has grown from 503 in 2000 to 636 this year. ( GOOD WORK )

Critics of the S.E.C. also attribute the decline in criminal cases to shortages in staffing and resources in the agency’s investigative units, policy changes that have reduced the authority of investigators to pursue cases on their own, and a “revolving door” phenomenon that has led investigators to leave the agency for high-paying jobs in the industry that they once helped to monitor.( A MAJOR CAUSE )

“It’s been awful,” Sean Coffey, a former fraud prosecutor in New York who now represents investors in securities litigation, said of the S.E.C.’s recent enforcement record. The agency has “neutered the ability of the enforcement staff to be as proactive as they could be. It’s hard to square the motto of investor advocate with the way they’ve performed the last eight years.” ( A TOTAL DISGRACE )

Mr. Coffey said he believed the declining number of stock fraud prosecutions is partly a result of the backlash the Bush administration experienced after its aggressive pursuit of corporate crime following the Enron collapse in 2002, which led to the creation of a national task force on corporate wrongdoing. ( THEY LISTENED TO THEIR MASTERS )

In the last few years, he said, “the administration has been sending the message that we’re going to loosen the binds on the market to compete in the global marketplace, and they’ve pulled the throttle back on prosecutions because it wasn’t politically necessary anymore.” ( THAT WORKED WELL )

I'm saying that this is the second major cause of this crisis, and it is a result of decisions by the absolute worst administration, by a factor of ten, than any other administration since the beginning of the twentieth century. Hoover lived in a much tougher era, and was a genius compared to Bush. Nixon was Lincoln compared to Bush. When he's gone, the worldwide sigh of relief might effect global warming.

"We probably will never have enough resources to address the problems as most of us would like to.”

Since Fraud, etc., is second on my list of the causes of this crisis, you can imagine why this irks me. From Bloomberg:

"By Patricia Hurtado

Dec. 21 (Bloomberg) -- The FBI has been forced to shift agents from terror and other crime work to Wall Street investigations including the Bernard Madoff Ponzi scandal, said David Cardona, head of the New York office’s criminal division.

The Federal Bureau of Investigation has had to engage in “triage” in responding to successive frauds( FRAUDS. DO YOU SEE THAT? FRAUDS ) involving subprime mortgages, auction-rate securities and Madoff, who prosecutors said confessed this month to bilking investors out of $50 billion, Cardona said in an interview yesterday.

“We have to work those cases which we think pose the greatest threat,” he said. “In this case, it’s a threat to the financial system and Wall Street ( GOOD MAN ). It’s the same with mortgage fraud( FRAUD. DO YOU SEE THAT? FRAUD ). I’m ramping these squads up.”

Special Agent Rachel Rojas, who once worked on tracing terrorist financing and al-Qaeda, now oversees 15 agents investigating mortgage fraud( FRAUD ), said Cardona, a career agent with 23 years at the bureau who once worked as a New York state accountant. He declined to say how ( IS IT SMART TO ANNOUNCE THIS ? ) many other agents he has reassigned from anti-terror work to financial crimes.

Rojas heads one of two such mortgage-fraud squads that work with federal prosecutors in Brooklyn and Manhattan and other federal agencies, Cardona said. The U.S. Justice Department has created more than 40 mortgage-fraud ( FRAUD ) task forces around the country this year.

To address the rise in criminal investigations related to the subprime crisis and other financial crimes, his office has become more selective on the kinds of cases they’ll take on, Cardona said. They do handle multimillion dollar fraud cases, while referring smaller cases to state prosecutors or to New York Attorney General Andrew Cuomo, Cardona said.( EVERYBODY SHOULD BE HELPING WITH THIS INVESTIGATION )

Big Case Skipped

Even some big cases are left to others now. The FBI didn’t get involved in the investigation of Marc Dreier, a New York lawyer charged Dec. 8 with defrauding ( FRAUD ) hedge funds out of more than $100 million. The Dreier case is being handled by investigators in the U.S. Attorney’s Office in Manhattan.

To save agents time, the New York office has also established Web sites and telephone hotlines for anonymous e-mail complaints and tips about mortgage fraud( FRAUD ) and the Madoff case, Cardona said.

Since he arrived from Miami in May, 2007, Cardona, 52, has overseen 400 agents who handle criminal cases. The New York office covers New York City, Long Island, Westchester and the five counties north of New York City. In addition to the main office, located just north of Wall Street, Cardona oversees five smaller satellite bureaus in Queens, White Plains, Long Island, John F. Kennedy International Airport and Goshen, New York.

FBI’s $6.8 Billion Budget

Under Cardona, the FBI’s New York office has also forged new relationships with regulators and other federal agencies as a means of stretching manpower, he said. His agents are working with the Federal Housing Administration on mortgage fraud ( FRAUD ).

“We’re working to marry our efforts,” he said. “There is tons of stuff out there,” Cardona said. “But we don’t have the resources to chase every collapsed hedge fund or collapsed financial institution,” Cardona said. “We don’t have the expertise or the manpower,” he said( GET THEM HELP ).

According to FBI statistics, the bureau’s budget in fiscal year 2008 was about $6.8 billion. There is no allocation for greater funding in the 2009 budget, he said ( TAKE IT FROM TARP ).

“Realistically, in the era of limited resources, the FBI in New York will strive to use the necessary resources to address the criminal activities we feel are the most important,” he said.

Criminal conduct involves a higher standard of proof to secure a conviction than the civil allegations the U.S. Securities and Exchange Commission may file against a financial institution, so it’s harder to make cases, Cardona said.

‘Market Dynamic’

He cites the bank failure at Washington Mutual -- the largest in U.S. history -- as an example of obstacles the FBI faces in showing if there was criminal wrongdoing.

“You can scratch your head and say, ‘Was there criminality that happened there?’” he said. “How can that collapse? Was that mismanagement? My standard is higher than that. I have to show criminal intent. Sometimes you see a bank failure or a hedge fund collapse, and I have to see is that just a market dynamic or is something else going on( THIS PLEADING STUPIDITY WORKS VERY WELL ).”

The fall in the stock market this year didn’t create the recent surge in financial crimes, Cardona said.

“Mortgage fraud( FRAUD ) was perpetrated in good times, but no one saw it( WHO WAS LOOKING FOR IT? ),” Cardona said. “In bad times, as we are in now, you see the manifestation of the crime problem. It was there, but like the tide going out, you just didn’t see until the margin calls started coming in.”

Madoff, Bear Stearns

The workload of Cardona’s agents this week ran the gamut from an indictment in gangland slayings to working with the SEC to Bernard Madoff’s alleged $50 billion Ponzi scheme. Cardona declined to discuss any details of the Madoff case.

Under Cardona, the office had some recent high-profile white-collar prosecutions this year: in June the FBI teamed up with the SEC and prosecutors in the office of Brooklyn U.S. Attorney Benton Campbell to bring indictments against two former Bear Stearns Cos. hedge fund managers in the first prosecution stemming from a U.S. government probe of last year’s mortgage market collapse.

In September, the same group brought indictments in a second case, against two former Credit Suisse traders accused of fraudulently selling corporate clients more than $1 billion of auction-rate securities linked to subprime mortgages. The defendants in both cases have pleaded not guilty and are scheduled to be tried next year.

While counterterrorism remains a top priority for the office since the terrorist attacks of Sept. 11, 2001, Cardona said he’s also cognizant of the threat white-collar fraud poses to the U.S. economy.

No. 1: Terror

“In New York, No. 1, that is terror but also my area of responsibility is any crime that undermines the confidence in our financial-services industry.” He said. “To me that’s another top threat ( TRUE ).”

“All law enforcement will tell you they’d like more resources,” he said. “We’d like to take some problems and crimes out completely. But there are a lot of cases out there I’d like to spend more time on, but we have to hit the bigger targets. We probably will never have enough resources to address the problems as most of us would like to( THAT'S GREAT ).”

Letting people get away with Fraud, Negligence, Fiduciary Mismanagement, and Collusion, by pleading Stupidity or not being investigated for lack of resources, as in the S & L Crisis, assures us that this problem will be back again before we know it.

"As an investor or trader , you have to perform due diligence not on just trades or investments, but also on your broker or prop firm, your bank,...

I posted that you cannot just trust Banks because they have Low-Information Assets. You must study and examine every place that you invest or put your money. Here's the Trader's Narrative:

"Due diligence has many meanings depending on context. If you pressed me for a definition within finance, I would say it is:

The process of investigation undertaken by an party to gather material information on actual or potential risks involved in a financial transaction or relationship. ( I AGREE, AND WILL KEEP THIS AS "TRADER'S NARRATIVE'S DUE DILIGENCE )

If you suffered losses as a result of Madoff’s fraud, then this lesson is extremely expensive. If not, it is probably the biggest gift Madoff has given the world.

As an investor or trader

, you have to perform due diligence not on just trades or investments, but also on your broker or prop firm, your bank, your accountant, etc. Each link in the chain is vital. Never assume anything. Check and verify every little detail. As this most recent event has shown beyond a shadow of a doubt, you have to take personal responsibility and can not have the SEC or FBI do it for you."

Please note this point well.

"Madoff’s Ponzi scheme has snared not just wealthy individuals but very large instititutions like Nomura, BNP Paribas, Neue Privat Bank, Santander, UniCredit, Lombard Odier, Royal Bank of Scotland

as well as dozens and dozens of fund of funds that allocated portions of their assets under management to Madoff. These institutions supposedly have whole departments full of lawyers and accountants who are given the task of due diligence. Each and everyone of them failed their fiduciary responsibility and will probably be sued by those who experienced losses."

I hope that this occurs. It's absolutely necessary in order to try and avoid this happening again.

"Just out of curiosity, I looked the website for Optimal Investment Services, the hedge fund

arm of Banco Santander. Here is a snippet:

Optimal clients were exposed to the tune of 2.33 billion euros or $3 billion US dollars, according to a report from Bloomberg.

What sort of due diligence did they perform exactly? one that didn’t flag a potential problem with Madoff being the broker, custodian and investment manager, all rolled into one? one which missed the fact that a tiny one person accounting firm did their annual audit?

A lot of heads in “due diligence” and “risk management” departments are going to roll."

Maybe Hempton could do it.