US financial regulators came under attack Tuesday for failing to stop an alleged 50-billion-dollar fraud scheme that Wall Street heavyweight Bernard Madoff is accused of running. After failing to regulate before and during the subprime fiasco, regulators can ill-afford another black eye. Madoff, who was well liked and well connected in financial circles, left HSBC on the hook for approximately $1 billion.
The United States is attracting unwanted attention as lax financial regulation and in fighting between state and federal regulators make the system look like a worldwide failure. President Bush constantly refused IMF inspections in the United States, agreeing just recently to allow an inspection only if results are not announced until Bush leaves office.
Jean-Pierre Jouyet, France’s former European affairs minister who this week took over at France’s financial markets watchdog, the AMF, said: “For the fourth time, American regulation is in question.” He cited three previous crises: the 1998 collapse of US hedge fund managers LTCM; the 2001 false-accounting scandal involving energy giant Enron; and the collapse in September of the Lehman Brothers bank.
Spanish newspapers tore into the US regulators. “The supposed meticulous supervision by (US financial watchdog) the SEC has failed in the task of preventing massive fraud,” Spanish newspaper El Pais said. La Vanguardia newspaper said: “It must be asked how it is possible that no one had detected anything abnormal about his activities.”
Madoff, 70, was arrested Thursday and allegedly confessed to defrauding 50 billion dollars in a scam that collapsed after clients asked for their money back due to the global financial crisis.
HSBC was not the only bank to suffer losses.
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