Yesterday, the news broke that the Securities and Exchange Commission allegedly has been destroying thousands of files related to cases involving "activity at large banks and hedge funds during the height of the financial crisis in 2008"
. This is being reported at Market Watch, and Matt Taibbi has a piece in Rolling Stone
about this as well. It appears that he broke the story.
From Market Watch:
Agency staff “destroyed over 9,000 files” related to preliminary agency investigations, according to a letter sent in July to Grassley, the top Republican on the Senate Judiciary Committee, and obtained by MarketWatch.
The allegations were made by SEC enforcement attorney, Darcy Flynn, in a letter to Grassley. Flynn is a current employee, and according to the letter, received a bonus for his past year’s work.
Flynn alleges the SEC destroyed files related to matters being examined in important cases such as Bernard Madoff and a $50 billion Ponzi scheme he operated as well as an investigation involving Goldman Sachs Group Inc. trading in American International Group credit-default swaps in 2009.
There is far more about this in both articles I have linked. This promises to become a huge scandal. That said, something caught my eye this morning as I was surfing around the 'net looking for a story to write about today. Chuck Grassley states:
“It doesn’t make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what timeframe, and to what extent its actions were consistent with the law.”
Republican or not, he is correct to ask that question. Many people have asked why no one has been prosecuted or investigated, but I wonder if Mr. Grassley was aware that his esteemed colleague in the House may have known something about this for a long long time. Early in the morning, Think Progress broke some damning news about Darrell Issa:
Goldman Sachs VP Changed His Name, Now Advances Goldman Lobbying Interests As A Top Staffer To Darrell Issa
Issa’s demand to regulators is exactly what banks have been wishing for. Indeed, Goldman Sachs has spent millions this year trying to slow down the implementation of the new rules. In the letter, Issa explicitly mentions that the new derivative regulations might hurt brokers “such as Goldman Sachs.”
Haller, as he is now known, went by the name Peter Simonyi until three years ago. Simonyi adopted his mother’s maiden name Haller in 2008 just as he was leaving Goldman Sachs as a vice president of the bank’s commodity compliance group. In a few short years, Haller went from being in charge of dealing with regulators for Goldman Sachs to working for Congress in a position where he made official demands from regulators overseeing his old firm.
Check out the timeline for this fellow:
– After completing his law degree in 2000, Haller was employed by Federal Energy Regulatory Commission as an economist, and later with the Securities and Exchange Commission in the Office of Enforcement.
– In April of 2005, Haller resigned from the SEC to take a job with Goldman Sachs. He soon began lobbying the SEC on behalf of Goldman Sachs.
– On September 2, 2009, Haller left Goldman Sachs to take a job with the law/lobbying firm Brickfield Burchette Ritts & Stone.
– In January of 2011, Haller was hired to work for Issa on the Oversight Committee. Under the supervision of Haller, Issa sent a letter dated July 22, 2011 to bank regulators (including the heads of the Federal Reserve, FDIC, FCA, CFTC, FHFA, and Office of Comptroller) demanding documents to justify new Dodd-Frank mandated rules on margin requirements for banks dealing in the multi-trillion dollar OTC derivatives market, like Goldman Sachs.
One has to wonder at this point: how much does Darrel Issa know, and when did he himself know it. As the head of the House Oversight Committee he CERTAINLY should be able to help Senator Grassley out. Forbes reports
If the allegations are found to be true this would be a detrimental blow to the SEC’s already shoddy reputation. The agency has been publicly flogged for missing the Madoff fraud. Since then it’s been trying to redeem itself by restructuring its operations and by adding new lieutenants like chief enforcement officer Robert Khuzami. Further the SEC has been heavily criticized for its revolving door in which its employees leave to work for Wall Street and vice versa thus created a conflicted environment.
It appears quite clear that revolving door includes Congress as well. I want someone to investigate Congressman Issa for starters.