The Keystone Cops of Stock Market Regulation affects Hoosier investors

Gary Weiss, reporter and author of "Wall Street vs. America" in which I hope "Crazyman's Economics" will be a companion piece, reported Tuesday on his blog about the SEC proudly announcing the fraud charges against Scottrade.

Until, he points out, you notice the details. Once you read the entire press release, Weiss points out that the SEC had used its' favorite weapon, as Weiss calls it, the "limp soba noodle:"

As Weiss notes:
"Any reader of Wall Street Versus America will be familiar with my "wet soba noodle" metaphor, which described how the SEC treats securities transgressors with kid gloves (when it is not ignoring their depredations entirely). So it is with Scottrade, which misrepresented the way it handles certain Nasdaq trades.

"Scottrade was slapped, in the most limp-wristed sense of the word, with a $950,000 civil penalty and an agreement never to do again what it just has not admitted doing.

"But for a real enjoyment, get a load of the SEC patting itself on the back after slapping Scottrade with a ridiculously ineffectual penalty.

"I think it was Chris Byron who called the press the "SEC's seeing-eye dog." But that is not fair to the blind. A better metaphor would involve not visual acuity, but intestinal fortitude."

In "Crazyman's Economics," we describe the role of self-regulated agencies like the SEC, the National Futures Association (NFA) and the Commodities Future Trading Commission (CFTC) as:

1. To make sure rules and regulations are created to ensure the success of the organization;
2. To make sure the winners in the markets get their money;
3. To make sure the losers in the market can't hold the brokers and exchanges liable; and
4. To not require any records be kept or released to the public which would be negative to the success of the organization.

The key is that they are working in the best interests of the brokers and exchanges, not the investor.

People involved in the markets will tell you that they are heavily regulated, but they are not the correct regulations.

As Weiss points out, and as we argue in our book, the SEC remains an ineffective watchdog of average investors, including those in the state of Indiana and SI members with 401k's.

Will President Obama or McCain appoint someone with teeth to make the SEC a protector of the hoosier investor, or will it remain the protector of Wall Street?