Washington, D.C.—The leader of the union representing thousands of federal financial regulatory employees, including bank examiners and other enforcement personnel, today sharply criticized the head of the Securities and Exchange Commission (SEC) for abdicating responsibility and blaming agency employees for the recent Madoff financial scandal.
“Responsibility starts at the top and I am outraged that Chairman Cox immediately points the finger at frontline employees even before he begins the internal investigation he announced yesterday,” said President Colleen M. Kelley of the National Treasury Employees Union (NTEU).
Kelley was reacting to media statements published today in the Washington Post and other outlets in which SEC Chairman Christopher Cox criticized agency employees for allegedly not pursuing information that might have addressed a growing scandal involving the financial activities of Bernard Madoff.
“While a fair investigation is necessary to determine whether appropriate actions were taken by individuals, it is outrageous to make statements that shift the blame to frontline employees,” said Kelley.
“Whether we are talking about the Madoff scandal or other recent problems in the financial markets, it is clear that any failings at the SEC can be traced to senior leadership who have fostered a political climate in which deregulation has been the order of the day,” said Kelley.
She pointed to a report by the Washington Post, which stated: “H. David Kotz, the inspector general of the SEC, has issued a number of scathing reports this year that have ruffled feathers and called for disciplinary actions against senior officials.” (Emphasis added.)
Under the current leadership, Kelley noted, the agency has cut staff, neglected to seek sufficient resources, hurt retention by instituting morale-draining workplace policies and engaged in actively deregulating the financial industry the SEC is charged with overseeing.
In fact, President Kelley said, Chairman Cox issued a press release earlier this fall claiming that SEC enforcement staff had increased to 34 percent of the workforce from 32 percent in 2005. However, the New York Times uncovered the actual staffing numbers and discovered there was a decline of 57 employees in the enforcement staff over that period.
“The recent financial crisis has exposed some serious issues in the securities market,” said Kelley. “The hard-working, dedicated frontline employees at the SEC have been outgunned, underfunded and have suffered from inadequate leadership that is ambivalent about the agency’s mission.”
As the internal investigation at the SEC regarding the Madoff situation is conducted, Kelley said that she hopes the inquiry will be complete and will fully examine all the circumstances surrounding individual actions. Chairman Cox’s recent statement leaves questions, Kelley added, as to whether an internal investigation does not already have a predetermined conclusion.
“NTEU will closely monitor the investigation to see if an outside examination of the Madoff situation would be more appropriate,” Kelley said.
In addition to those at the SEC, NTEU represents financial regulators at the Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC) and National Credit Union Administration (NCUA). “The employees of these agencies are some of the most talented, experienced and dedicated men and women in the federal workforce,” President Kelley said.
For the past several years, NTEU has strongly advocated for increased tools and resources these employees need to carry out their agencies’ missions.
At the SEC, for example, NTEU successfully called on the House Appropriations Committee to provide an additional $15 million in funding in fiscal 2009 beyond the White House’s request. Last July, the Senate Appropriations Committee voted to approve another $25 million in SEC funding.
“NTEU believes that those who are opposed to the SEC’s historically strong regulatory program should not be permitted to use the current financial crisis as an excuse to further weaken the vital regulatory role of the SEC nor to further undercut the important work of frontline SEC employees,” Kelley said.
When Congress reconvenes, NTEU will urge an increase in the resources and authority of the financial regulatory agencies so that the country will not face the same kind of grave situation in the future.
NTEU is the largest independent federal union, representing 150,000 employees in 31 agencies and departments.