SEC head Mary Schapiro: Blame us for financial crisis too

Mary Schapiro says regulators 'failed to appreciate the growing and concentrated risks' as the meltdown loomed.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Katie Benner, writer-reporter

10 most powerful women in Washington
Rarely has D.C. wielded so much power over business, and never have so many women been calling the shots. We've ranked the 10 with the most impact excluding just one -- Michelle Obama -- who exercises her own brand of influence.

NEW YORK (Fortune) -- Regulators were as culpable for the financial crisis as banks, mortgage originators, and the ratings agencies, Securities and Exchange Chairman Mary Schapiro said Tuesday.

In a speech for attendees at the Securities Industry Financial Markets Association, Schapiro said of the regulatory community, "Perhaps we bought into the fears about global competition or failed to appreciate the growing and concentrated risks.

"Either way, the right questions were not asked, nor were the necessary steps taken to mitigate the risk before we coasted to the brink."

At a conference that also included remarks by JPMorgan Chase (JPM, Fortune 500) chief executive Jamie Dimon and Treasury Secretary Timothy Geithner, Schapiro said that market participants and regulators need to find their way back "to a place where investors have faith that the markets are working as intended."

Noting that the SEC will play an integral role in that journey toward trust and transparency, Schapiro's remarks made note of several areas she said need greater oversight, including hedge funds, over-the-counter derivatives, asset-backed securities, and financial advisors.

And in a nod to critics that accused the regulator of being asleep at the wheel on the Bernie Madoff Ponzi scheme, Schapiro said that the standard of conduct set by the SEC, "by itself, does not eliminate fraudsters." The rules must be coupled with an effective and harmonized regulatory body that oversees investment advisors and broker-dealers, she said.

Schapiro arrived at the SEC this January amid a hailstorm of criticism of the financial regulatory community. Not only had Madoff's investment business been revealed to be an enormous fraud, major institutions had failed, including Bear Stearns, Lehman Brothers, AIG (AIG, Fortune 500), Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500), and Merrill Lynch. The capital markets were frozen, and the recent era of deregulation was repeatedly blamed for the mess.

In order to toughen up the commission, Schapiro hired Rob Khuzami -- a former federal prosecutor who had focused on white collar crime, insider trading, and accounting fraud -- to head up the SEC's enforcement division.

Schapiro noted in her speech that the SEC has issued 448 formal orders since the beginning of this year, compared with 181 in 2008. It has opened 713 investigations in the past nine months, compared with 663 in all of last year. And it has received disgorgements and penalties of $1.8 billion, compared with $865 million last year. To top of page

Company Price Change % Change
Facebook Inc 61.36 -1.67 -2.65%
AT&T Inc 34.92 -1.37 -3.78%
Bank of America Corp... 16.37 0.08 0.49%
EMC Corp 25.91 -0.85 -3.18%
Verizon Communicatio... 47.43 -0.49 -1.02%
Data as of 4:01pm ET
Index Last Change % Change
Dow 16,501.65 -12.72 -0.08%
Nasdaq 4,126.97 -34.49 -0.83%
S&P 500 1,875.39 -4.16 -0.22%
Treasuries 2.69 -0.04 -1.47%
Data as of 10:52pm ET
More Galleries
Tools to make your money grow You've started saving and built a financial base. Time for a few new strategies and tools to get your money to grow even more. From real estate to IRAs, here are some tips. More
Ready to start saving? Here's how to do it right When you are just starting out or finally starting to get serious about saving, the basics will get you far. Here are more than a dozen tips that will help you lay the base for building your net worth. More
Meet four kings of Alibaba's online retail empire Alibaba's shopping sites account for 80% of online retail in China. Meet four successful merchants. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.