» Posted by Martin Weil on March 13, 2008

From Odd Numbers

Out of 20 S.E.C. settlements for market timing by mutual funds, 16 involved (Elliot) Spitzer when he was New York's attorney general.

The percentage of illegally-gotten money that mutual funds had to give back in the Spitzer cases was 80 percent -- almost full restitution.

In the 4 settlements not involving Spitzer, the S.E.C. settled for 7 percent.

Why the gap?

Part of it was Spitzer's aggressiveness, but the other factor was that younger S.E.C. officials usually go work at the firms they're in charge of regulating. So, the incentive to bring the hammer is, ummm, somewhat compromised.

Justin Wolfers explains why this should matter:

It seems to me that the truly important violations of the public trust are when the power we give our government officials is sold, rather than what government officials choose to buy. Yet our political scandals are too often dominated by private mistakes, rather than public misdeeds. This is why I'm more worried about what the SEC is selling than what Eliot Spitzer has been buying.

Previous entry: Quote of the day (economics junkies only)
Next entry: Finish that sentence

Back to Martin's View main page