Among the more common questions I am asked by the press and the public is whether the failings of Wall Street's regulators are a new phenomenon. A lot of folks seem to want to cling to a belief that the disclosures of regulators' nonfeasance in the Madoff scandal are aberrational and of only recent vintage. If you ask me (and many of you have), that's wishful thinking.
I like that word nonfeasance because it encapsulates what I think is the core of the problem. As I use that term, it means a failure to do an act that is legally required. It perfectly embodies the sense of an official who intentionally looks the other way and refuses to do his or her job.
So...did many Wall Street regulators just start engaging in nonfeasance a few weeks ago? Did the looking the other way and not doing the job start with Bernie Madoff? For starters, let me send the curious among you to the 1996 Business Week article by Gary Weiss: Did the NASD Look the Other Way? http://www.businessweek.com/1996/51/b35068.htm For a even more startling example of how regulators have avoided tackling the tough cases, read Weiss's acclaimed book: Born to Steal (Warner Books: 2003). [By way of disclosure, my former law firm represented the ex-NASD examiner Gilani, who is prominently cited in the magazine article and Chapter 3 of the book.]
You read the magazine article and the book, and then you answer my question: Do you think that the regulatory culture that Weiss described has changed during the past 13 years?
I think that the regulators' modus operandi as depicted by Weiss invited, if not nurtured, the alleged Madoff crimes. Assuming that you conclude, as I have, that nothing of substance has changed, then answer this one last chilling question: Do you see any proof that substantive, meaningful reforms are in the works?
I'll keep this blog uncharacteristically short. I've made my points about these issues too often and for too many years. Pathetic.