Madoff Scam Proves Wall St. Incompetence

Drastic regs needed, and be sure financial firms will resist
By Kevin Spak,  Newser Staff
Posted Dec 17, 2008 2:20 PM CST
Bernie Madoff's scam is yet more proof that accounting and rating agencies shouldn't be paid by the people they're supposed to be watching.
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(Newser) – If the Bernard Madoff scandal teaches us anything, it’s that Wall Street’s masters “aren’t just too clever by half,” writes Steven Pearlstein in the Washington Post, “they’re not clever at all.” They didn’t just get “bamboozled by a con artist,” they also enthusiastically delivered him their friends’ and relatives’ money—never asking why Madoff’s books were audited by three guys in a broom closet in Long Island.

The Madoff scandal is the latest in a long line of cooked-book scandals, from Enron to the credit meltdown. “It doesn’t take a PhD in finance to see the pattern,” says Pearlstein. Accounting firms and rating agencies have built-in conflicts of interest because they’re paid by the people they’re supposed to be watching. “After a decade of these scandals,” Pearlstein stews, “something needs to be done.”