Fallout from Madoff scandal: new safeguards?
Congress ponders its options – from better investment policing to a new watchdog.
If there is a lesson to be drawn from Bernard Madoff's alleged $50 billion financial fraud, it is that the United States needs a new legal and regulatory structure to protect investors in the 21st century.Skip to next paragraph
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That appears to be the consensus among Democrats, and some Republicans, on Capitol Hill as lawmakers look toward action in the coming Congress. Proposals range from creating a new securities supercop by combining existing agencies to blocking top regulators from taking jobs in industry to simply increasing the resources devoted to market scrutiny.
"This country will not work if we are not able to restore the confidence of investors that there are places they can put their money that will be both remunerative to them and productive for society," said Rep. Barney Frank (D) of Massachusetts, chairman of the House Financial Services Committee, at a Jan. 5 hearing.
The bottom line is this: The world of finance has become far more complicated in recent years. Washington needs to respond accordingly, according to many experts outside government.
The Securities and Exchange Commission, for instance, should be "a highly performing agency with the equivalent of engineers on every floor," says H. Peyton Young, a senior fellow in economic studies at the Brookings Institution.
The scale of Mr. Madoff's alleged fraudulent activities has continued to shock lawmakers and government officials, as its human cost has become more apparent in recent weeks.
In essence, Madoff is accused of pulling off one of the greatest cons in US, if not world, history, by scamming thousands of investors out of $50 billion while posing as a shrewd financial operator with a proprietary system that guaranteed steady, high returns.
Allan Goldstein is one of his apparent victims. A retired New York fabric distributor, Mr. Goldstein had built up a retirement fund of about $4.5 million, all of it invested with Madoff.
Goldstein estimates that he can make two more mortgage payments by cashing in his life insurance policies. After that, he is likely to lose his home. Everything he has worked for over his 50-year career is now gone, he told the House hearing on Jan. 5.
He'd thought US markets were the best-regulated in the world. "I believe my government has failed us and we have suffered tragically as a result," said Goldstein.