11. The SEC: Captured and Quite Happy About It

The reputation of the SEC, similar to the reputations of auditors, credit rating agencies, and stock exchanges, has declined in recent decades. The SEC protects sophisticated investors, such as those susceptible to complex frauds like front-running, instead of small investors who are victims of simple fraud. This pattern occurs largely because of incentives for SEC employees to gain expertise in regulating complicated fraud, which increases the likelihood that they will be hired by a big law firm or Wall Street firm in the future. The SEC appears to be captive of the large credit rating agencies. Dodd-Frank, with its creation of the Office of Credit Ratings, has only exacerbated this problem by creating ...

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