Should we just fire all the SEC's agents?

Shouldn't we? Under their supervisions, we have experienced one of the largest fraud case ever in the United States. The reverend Bernard Madoff (pronounced MAY-doff) has announced last week that he has ripped off more than US$50 billion from fools as large as banks to lad as small as local charity in Florida. Since Madoff Securities LLC was founded in 1960s, I guess the Ponzi scheme has at least been in business for a decade.

So should I say the SEC was sleeping during the last ten years? Probably. A US$17 billion venture has only three accountants auditing the books, and no one paid attentions? No third party was involved and Madoff Securities LLC claimed the responsibility of the trading, executions and custodian of all the financial instruments on behalf of the clients? Sounds a lot of conflict of interest under the table.

Well, don't blame them some pundits argued. Since Madoff's empire is a hedge fund, and SEC, by law, is not authorized to check. Well, that is a poor excuse as, technically speaking, the vehicle is not a hedge fund. Madoff just generated more than 10% every year and who knows how he made that. Most importantly, investors can cash out instantly, not to mention the nine months advance redemption notices many hedge fund demand their investors.

Let me offer my two cents. Don't blame the SEC, because they are poorly paid. During the boom time, all the smarties has left SEC and looked for more promising jobs in the private sector, read hedge funds and private equity. The SEC has been laden with the not-so-smart guys. So, do you think SEC can out-smart the big gun?

Don't bet on it.