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Expecting the Wrong things From Regulators

"How did alleged con man "Sir" Allen Stanford go from being a failed Texas fitness-club owner to becoming Antigua's in-your-face answer to Bernard Madoff?

And how did the feds fail to catch him for so long? Those are the questions tackled by veteran investigative reporter Bryan Burrough in an 8,000-word article available exclusively in the July issue of Vanity Fair."

This looks interesting, partly for the take on regulators that they don't need anymore legal powers to do their job.

But, I fear that there is again a simplistic notion that regulators are failing if they fail to prevent a Stanford or Madoff.  This is a simple mistake - what a society cares about from a regulator is that when our individual irrationality and greed allows a Stanford, Madoff or Enron to morph into a collective crime, the regulator calms us all down, allows us to get on with our businesses which require trading on trust.  

Modern commerce would fail if the skepticism needed to route out a Standford, Madoff or other con criminal were our routine pose at the marketplace.  We simply need more trust that ordinary evidence would support for modern commerce which takes place at many arm's length.

The regulator depends upon complaints, and as long as the marks aren't squawking or talking, then there is nothing for the regulator to do.

Related articles by Zemanta

• Allen Stanford Jailed On Fraud Charges (huffingtonpost.com)
• Financier Stanford, four others charged with fraud (myleadingleads.blogspot.com)
• Billionaire R. Allen Stanford charged in Ponzi scheme (seattletimes.nwsource.com)
• Judge orders Stanford held for detention hearing (nationalpost.com)
• No remorse in this financial crisis (money.cnn.com)
• Stanford victims tell of horror story (guardian.co.uk)
• Charged: Stanford Indicted, Faces up to 250 Years (abcnews.go.com)
• Sir Allen Stanford: Texan billionaire cricket promoter arrested by the FBI (telegraph.co.uk)

Full post as published by Misleading Advertising Law on June 22, 2009 (boomark / email).