Another problem was that Aguirre kept saying that his real beef was not with the targets of his investigation but with the SEC. Aguirre was alleging that the most powerful firms on Wall Street got special treatment from the SEC, in part because the regulators had a too cozy relationship with the folks they were supposed to be regulating. This story never got as much attention, perhaps because it was a lot less sexy.
Unfortunately it was this part of Aguirre tale that made the most sense. There is a revolving door between the SEC's upper echelons and the top Wall Street firms, who often hire former investigators, regulators and commissioners once they leave the agency. What's more, the SEC was more or less created by Wall Street to help boost investor confidence by creating the impression that someone was policing the financial sector and protecting investor interests. And from the start the SEC had helped stifle competition on Wall Street by increasing regulatory overhead and banning many of very the practices that had led some Wall Street giants to accumulate their power and capital. With the SEC around, for instance, it became much harder to build a new investment banking giant. (And this is one reason so much of the brains on Wall Street has fled to private equity and hedge funds.)
And this might be the heart of the reason that the real heart of Aguirre's story never got the attention it deserved, while the less-substantiated and more thrilling insider trading storyline hogged the headlines. At it's heart, Aguirre's story is not even news. It's something we've known for a long, long time. And that old story about how bureaucracies operate doesn't really translate into the sort of civil rights storyline reporters think will win them Pulitzers. So we don't hear much about that.
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Gary Aguirre: The SEC Is An Insider's Club
Posted by John Carney, Feb 27, 2007, 10:26am
garyaguirrefeb07.jpgRemember Gary Aguirre? He was the former Securities and Exchange Commission investigator whose explosive charges led to a series of hearings on Capital Hill and a lot of alarm-bell ringing publicity, particularly from Gretchen Morgenson of the New York Times. Aguirre's main charge was that he was fired from the SEC after an investigation into possible insider trading led him toward a top Wall Street executive.
Today the Guardian reminds us that not only is Aguirre still around. So are the problems he became famous exposing:
"What you have at the SEC is people rotating from jobs where you make $180,000 a year into jobs where you make over a million," Aguirre tells the Guardian in an interview, on what he sees as a mutually back-scratching relationship between the regulator and Wall Street. "It's very friendly - it's a club. I'm here, I'm inside, now I'm outside, now I'm inside again.
"When the SEC starts playing favourites and they decide not to go after Wall Street elite and focus on small fry, then they're not focusing on the players that really impact the capital markets. It's not the penny stock dealers that could trigger a credit crisis in this country."