This morning on Larry Mantle's Air Talk Show on KPCC I had a back and forth with the American Bankers Association on the problem with credit card users having their rates jacked way up even when they don't miss their payments. The Bankers' lawyer says the bait and switch tactics will all be fixed by 2010 with new federal regulations. Consumers cannot wait til 2010, not in this economy. And even then you have to question whether government regulators can get it right after watching Sunday night's 60 Minutes story on how the SEC knew about Madoff's scam as early as May 2000, but looked away.
The 60 Minutes segment, "The Man Who Knew," was produced by my brother Andy, and it shows how the SEC ignored the financial analyst who warned the regulators about Bernie Madoff's $50 billion fraud nine years ago. The segment raises fundamental questions about how the Obama administration will do better at making regulation work.
Financial analyst Harry Markopolos proved statistically that because Madoff's record was so good it was like a baseball batter hitting 960. it's such a perfect batting average it had to be a fraud. The whistleblower dug and kept blowing the whistle, unable to find anyone who had ever traded with Madoff because his investment fund never made trades. Still, the SEC ignored evidence that Markopolos said was 100% conclusive by 2005. He also said that major Wall Street firms knew and did not invest with Madoff, but wouldn't blow the whistle. Obama should listen carefully to Markopolos's reason why: "People in glass houses don't throw stones and self regulation on Wall Street doesn't work."
President Obama's SEC and entire regulatory structure needs to be far better. He should hire Markopolos on as a consultant to show how to rebuild what is an embarrassment of an agency and, in too many other corners, of a regulatory structure. For inspiration, the president should listen to Madoff, in his own words, explain back when he was on top how it was impossible to fool the SEC: www.cbsnews.com/stories/2009/02/27/60minutes/main4833667.shtml
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