SEC proposals reveal what went wrong on Wall Street

A long list of plans revealed today by a top U.S. Securities and Exchange Commission official to expand regulatory oversight of financial markets -- increased examinations, stepped-up enforcement and more subpoenas to compel truth-telling -- sound great on paper. But the list raises a larger question that has not been answered, or even asked. What has the SEC been doing until now? The director of the SEC Enforcement Division, Robert Khuzami, announced the agency's plans Wednesday in a speech to the New York City Bar Association, according to the Reuters international news service. Khuzami, a former federal prosecutor who took over the SEC's oft-maligned Enforcement Division in March, said there would be a "general sense of renewed urgency" to find and stop wrongdoing in the financial markets like the reckless practices blamed for the recent meltdown. The SEC has been under fire for failing to identify and stop those practices, and also for failing to detect massive frauds, like the multibillion-dollar scheme run by Wall Street insider Bernard Madoff for decades. "No one has told me to bring more cases," Khuzami said, according to Reuters. "What they have told me is we need to be vigorous advocates for investors." But why would Khuzami have to be told to do that? Why wouldn't the SEC do that -- why wasn't the SEC doing that -- as a matter of course? Isn't that the agency's reason for being. The same idea applies to other changes now underway that Khuzami announced Wednesday. Khuzami said the SEC is creating new divisions to probe cases involving asset management, foreign corrupt practices, market abuses, municipal securities and public pensions, and structured products, Reuters said, and a new group has already been set up for abuses in the subprime mortgage market. Does that mean the SEC wasn't already doing these things? Khuzami's announcement of a new office to investigate complaints and tips also is cause for concern. It's nice that the agency plans to do this going forward, but what has it been doing? Did it really take a massive economic collapse and subsequent worldwide recession to convince the SEC that these steps were necessary? Doesn't anybody in Washington know how the game is played?