How many scandals have to occur before SEC enforcement gets a decent budget?
Sigh. We talked about this over a year ago: Congress cuts S.E.C. budget. Its not getting any better, and new regulations requires more enforcement.
Why is this important? After the 1929 crash, the widespread perception was that the game was fixed, the government was in cahoots with the investment trusts, and the public did not stand a fair chance.
An entire generation of investors left the markets — for good. It took until 1954 to get back to breakeven from market highs in 1929. That’s a full generation later.
We are risking a similar investor exit. The lack of adequate enforcement, despite the many, many scandals, means we are inviting another generation to toss up their hands in frustration and bail. A perception can develop that Commodoties and Real Estate offer the same upside — but without the corruption.
This is potentially a huge negative on the sentiment side. I’d be curious if any polling has been done asking individual investors their thoughts on how fair they thought the corporate environment is and whether an individual stands a fair chance in the stock market.
Everyone hates losing, but its part of life, and of playing a game. But if the perception becomes that the game is fixed or the refereres are corrupt, well, that becomes a very different issue.
SEC Says Budget Proposed by Bush To Slow Its Hiring
WSJ, March 14, 2005; Page B2