The government reward for doing a bad job

Todd Henderson —  28 July 2010

In the world of competitive markets, if one does a bad job, the typical result is less resources, less power, and more oversight by interested parties. If a firm makes a bad product, there will be fewer profits, lost market share, and additional attention from Consumer Reports, plaintiffs’ lawyers, and regulators.

In the world of government, however, the opposite is often true. The SEC, one of the most highly regarded agencies in Washington, did a terrible job over the past decade. One could cite innumerable examples, but two stand out: the SEC failed to detect the Madoff fraud despite countless audits and investigations; and the SEC’s “Consolidated Supervised Entities” program, which allowed investment banks to increase leverage ratios to more than 30 to 1, was a root cause of the financial crisis.

What is the SEC’s reward for consistently bungling its job? The financial reform legislation recently signed by the president gives the SEC vast new powers, which the SEC says it needs 800 new employees to implement. In addition, the SEC is now claiming that the law exempts it from the Freedom of Information Act.

Failure = more resources and less transparency. That is an equation one would only find in government.

2 responses to The government reward for doing a bad job


    by this logic we should end law schools and toss all the writers on this blog out on the streets for the little they did during the same period for their students

    George Bush and the Supreme Court ought to also be pitched (the later gave us Central Bank of Denver, which was more responsible for the melt down than the SEC


    Federal regulatory agencies often have to perform their work under administrators who are political appointments and who sometimes have agendas hostile to the very mission of the agencies they are tasked to run. Just strikes me as a relative difference that might blur the contrast in accountability you are drawing.