In 2007, Cox pushed through a rule requiring SEC staff to get authorization from commissioners for financial penalties before settling a case. Cox says the rule was an experiment designed to streamline the process.
In fact, it quickly created delays and obstacles, so much so that SEC officials often stopped seeking penalties. “It wasn’t worth it,” a former commissioner says. “All they got was abuse every time they went before the commission and asked for penalties.” Some investigations didn’t get even that far. Gary Aguirre, a senior SEC lawyer, sought to question the chairman of Morgan Stanley in a fraud investigation but was denied permission before Cox arrived. He later told Congress that his superiors, fearing the banker’s “very powerful political connections” in Washington, had delayed the probe, dooming any chance of making a case–allegations that a Republican Senate report later found credible.
Eventually, enforcers at the SEC grew demoralized. One by one, key officials left the agency; Aguirre was fired under Cox. Sensitive cases seemed to lag. Cox has admitted that his staff brushed off “credible and specific” reports of fraud committed by Madoff over the past 10 years and did not seek subpoena power or bring tips to the attention of commissioners.
The global crisis is exposing deep flaws in China’s development model. As overseas shoppers have closed their wallets, China is learning the downside of a dependence on making cheap stuff for the rest of the world. Years of pumping up its industrial strength by throwing money into superhighways and supersized factories have left it too muscle-bound for its own good.
Fixed-asset investment – in things such as land, building and machinery – has grown by a pell-mell annual rate of 20 per cent and more. One result: China has no less than 80 car makers and thousands of steel mills.
Services, meanwhile, account for just 40 per cent of GDP, compared to 54 per cent in other middle-income countries and 70 per cent in high-income countries.
The gold standard — i.e., the gold standard — was the monetary system more or less continuously in place between Waterloo and World War I. It was simplicity itself. Bank notes were exchangeable into gold, and gold into bank notes, at a fixed, inviolable rate. A central bank’s everyday job was to facilitate this exchange. Of what we know today as “monetary policy” — i.e., manipulating interest rates or the money supply to promote full employment or to pull the economy out of the ditch — the conscientious central banker would have no part.
To John Maynard Keynes the sheer caprice of digging up gold out of the Earth only to rebury it in the vaults of the Bank of England was insupportable. And Keynes, so Mr. Ahamed insists, was right: “There is no greater testament of his legacy . . . than that in the 60-odd years since he spoke, . . . armed with his insights, the world has avoided an economic catastrophe such as overtook it in the years from 1929-33.”
