WASHINGTON (AP) – It’s not often that erudite senators declare themselves baffled, mystified or bereft of understanding. But they’ll cast themselves as clueless if it helps to make this point: That profound fraud, government screw-up and/or scandal? Not our fault.

Especially the one involving Bernard Madoff. That was the Securities and Exchange Commission’s fault, at least according to lawmakers.

How in the world, members of the Senate Banking Committee asked two SEC officials on Tuesday, did the regulatory agency get bamboozled by Madoff while he allegedly made off with $50 billion in a huge Ponzi scheme?

“It is almost inconceivable to me,” said Sen. Bob Menendez, D-N.J.

“It’s incomprehensible to me,” said Sen. Jeff Merkley, D-Ore.

“It perplexes me,” said Sen. Mike Johanns, R-Neb.

“You understand how mystifying it is,” the committee’s chairman, Sen. Christopher Dodd, D-Conn., told the officials.

Not asked: Why didn’t Congress, with its oversight responsibility, investigative staff and budget-setting authority, catch the SEC not catching Madoff? Did anyone at the SEC feel pressure from any member of Congress to look the other way?

Apt questions, perhaps, but not ones that were asked at Tuesday’s committee hearing.

It’s true that the Wall Street-regulating SEC has the primary responsibility for nabbing fraudulent financiers like Madoff. Its inspector general is looking into how the Madoff matter slipped through the bureaucratic cracks.

But Congress comes in a close second. The Constitution charges the legislature with overseeing the executive branch, of which the SEC is a part. The Congressional Staff Directory, a venerable publication published by Congressional Quarterly, describes the Senate banking panel as having jurisdiction over the “Securities and Exchange Commission … financial exchanges and markets … corporate accountability; corporate fraud; securities fraud.”

Congress controls agency budgets. It employs hundreds of investigators on House and Senate oversight committees and at the Government Accountability Office, which investigates anything Congress tells it to. The Senate also had a Permanent Subcommittee on Investigations.

As for influence, Madoff ran a robust campaign contribution and lobbying effort. He and his wife, Ruth, have given $238,200 to federal candidates, parties and committees since 1991. Democrats received 88 percent of the money, according to the Center for Responsive Politics.

Bernard L. Madoff Investment Securities gave $372,100 in campaign contributions in the same period, 89 percent of it to Democrats. The firm also spent $590,000 on lobbying in the past 11 years, according to the report.

Dodd asked the SEC officials testifying – Lori Richards, director of the Office of Compliance Inspections and Examinations, and Linda Thomsen, director of the agency’s enforcement division – what Congress might do to strengthen regulatory enforcement. And he’s asked the agency’s newly confirmed chief, Mary Schapiro, to tell him what it needs.

Critics have said the Bush administration did not give the SEC enough money for enforcement. For example, the agency didn’t get a budget increase in 2003, the year after some big corporate scandals.

In a composition rich with mixed metaphors and evocations of SEC founders Joseph Kennedy and Franklin Roosevelt, Sen. Charles Schumer D-N.Y., theorized exactly how the Madoff scandal happened: inexplicably.

“Madoff’s fraud was so immense and obvious, and took place over such a long period of time, it is simply inexplicable how the SEC missed it,” Schumer said in a statement he read. And by the way, he and Sen. Richard Shelby, R-Ala., are introducing a bill to hire 100 new SEC enforcement personnel and staff.

But back to Madoff and who is responsible for the scandal.

“It’s as if there was a giant elephant standing next to the SEC in a rather small room for 25 years, and the SEC never noticed the elephant or even the smell of peanuts on his breath,” continued Schumer, who, like Dodd, received campaign contributions from Madoff, only to later return them or donate them to charity.

“All they had to do was peel away one layer of the onion skin, and it would have been apparent how broad and deep this fraud was,” Schumer said.

The same could be said for Congress.

Perhaps inadvertently, Dodd said as much toward the end of the hearing when he discussed how the agency flags financiers at risk for fraud.

“Clearly we need to re-evaluate risk assessment,” he told the SEC officials. “We missed Madoff.”


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