There was an interesting article in yesterdays Wall Street Journal entitled
"Did Authorities Miss a Chance to Ease Crunch?".
Here's an excerpt:
Federal and state authorities may have missed an opportunity two years ago to get ahead of the mortgage-securities-pricing crisis now gripping Wall Street.
In 2005, the Securities and Exchange Commission and New York state's attorney general's office launched separate investigations into whether Wall Street securities firm Bear Stearns Cos. harmed investors by improperly valuing complex mortgage securities. Determining the prices of these securities, often based on mathematical models, involves some guesswork, particularly in distressed markets.
An SEC branch office said it intended to recommend that Bear Stearns be charged for improperly pricing about $63 million of mortgage securities it sold to a bank; the New York attorney general's office, headed at the time by Eliot Spitzer, had sought information about how Bear priced $16 million of mortgage securities it sold to an institutional client.
In each case, government authorities dropped the enforcement cases, according to regulatory filings and people familiar with the matter.
The two aborted cases have new resonance amid the credit crunch and resulting crisis engulfing the financial world. It was Bear Stearns's disclosure of badly priced mortgage securities in two of its internal funds that helped spark this year's mortgage-market and credit convulsions.
High-profile enforcement cases could have sent a message to Bear Stearns and other Wall Street firms to attempt to more accurately price mortgage securities. Such a message could have helped blunt the impact of the current crisis, which has led to investor uncertainty over how firms price these mortgage-related instruments. "The right kind of case can have an impact marketwide," says Edward Fleischman, a former SEC commissioner and now a senior counsel at law firm Linklaters.
Notably, the WSJ Article has no information on why these actions were aborted.
With the US economy going down the tubes due to the sub-prime crisis, I think the American people deserve to know why a very pointed probe by the SEC into the heart of what has become the sub-prime crisis was mysteriously halted in 2005.
In a more perfect world, I'd like to be objective and factual say we have no further information on this subject. Normally I don't think its proper to speculate. But the record of the Bush Administration in corrupting and interfering with normal operations of our government has been demonstrated over and over. For this reason, I'm no longer willing to give them the benefit of doubt on this issue. The mysterious cancellation of this probe smacks of the demonstrated M.O. of the Bush Administration.
I believe that Congressional hearings should be held to determine if SEC officials were pressured to drop this case in 2005, and if Bush Administration Officials were involved.