Mr Markopolos, who tried for nine years to expose Mr Madoff, told a Congressional hearing on Wednesday that staff incompetence on the part of the US Securities and Exchange Commission was partly to blame for failing to bring a case against Mr Madoff earlier.Here's the thing: as was noted in a Talk of the Town item last month, the word 'credit' comes from the Latin for 'to believe'. To the extent that this is a credit crisis, fraud isn't a side issue; fraud is at the very heart of the thing.
“I gift-wrapped and delivered the largest Ponzi scheme in history to them,” he said. Most officials “did not understand...the 29 red flags that I handed them”.
“The SEC securities lawyers, if only through their investigative ineptitude and financial illiteracy, colluded to maintain large frauds such as the one to which Madoff later confessed,” Mr Markopolos said.
Whatever the state of the fundamentals, whatever would have happened anyway, the Bush administration's passive tolerance of systemic fraud unquestionably made it much, much worse. And to the extent that this is a crisis of faith, only the restoration of rigorous enforcement will make it possible for people to believe--that is, for credit to function again.