For tweve years, dating back to 1997, the Secuties and Exchange Commission strongly suspected that a billionare businssman named R. Allen Stanford was operating a Ponzi scheme. But the SEC did not bring fraud charges until February 2009,
How could this be?
In April 2010, the inspector general of the SEC attempted an answer. It was not due to "any improper professional, social or financial relationship on the part of any former or current SEC employee," according to the IG's report. This finding came despite evidence that a SEC enforcement official who helped block full-scale investigations of Stanford's activites later served as his legal counsel.
The inspector general did find, however, that "institutional influence" was a factor in the repeated decisions not to investigate Stanford more thoroughly. "Institutional influence" is the IG's shorthand phrase for a stats-obessed metrics mentality that prevailed within the Forth Worth office of the SEC for over a decade. Senior agency officials believed they were being judged by their managers on the sheer number of cases they brought, and therefore discouraged the enforcement staff from pursuing challenging cases. Stanford's case wasn't a "quick hit," so time after time it got shelved - until the changing of the guards to the Obama administration.
I'm not surprised to learn of utter imcompetence bordering on malfeasance during the George W. Bush years. What I'm struck by, rather, is that the inaction in the face of ongoing fraud began during the Clinton era. How does one account for this?
Jason Linkins has very good blow-by-blow account in The Huffington Post.
In terms of the underlying ideology, it surely has something to do with the often-toxic tide of Reaganism that continues to wash through American public life. If government is supposed to be the problem, not the solution, then one option is to "starve the best" - keep cutting the funding, yet still somehow expect the same services.
Having worked in state government in the late 90s and early 2000s, I remember quite well the building pressure to do more with less. Al Gore himself presided over the Reinventing Government initiative that was so popular back then. Small wonder, then, that major balls got dropped while bureaucratic managers counted the beans.