You may have seen that as far back as 1999, an investment manager named Harry Markopolis attempted to alert the SEC of the likelihood that Bernard Madoff was running a ponzi scheme. He presented statistical evidence to strongly suggest that Madoff simply could not have produced his published investment results using the strategy he claimed to employ.
Markopolis was rebuffed by the SEC (and yes, initially, this was on Clinton's watch) but persisted in trying to make his case. In November 2005 he produced the attached 19 page, single-spaced memo to SEC, which is breathtaking in its thoroughness and prescience:
http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf
I highly recommend that you take a little time and read the memo. Some of it was a little too technical for me -- I don't fully understand the hedging strategy that Madoff was purporting to use -- but what comes across is how incredibly logical Markopolis was in his analysis and how inconceivable it is that the SEC would not have found this a worthy basis to perform a detailed audit of the Madoff operation. (In fact, Markopolis has a number of practical suggestions to the SEC, which, if followed, would have quickly uncovered the fraud.)
The SEC, along with the Justice and Treasury Departments, was once an agency with an elite reputation for expertise and integrity. Clearly that sense of mission and excellence has been lost as the agency has become drawn ever closer to the industry that it is supposed to regulate. So this will be yet another mission for the Obama administration. Replacing Christopher Cox with someone who actually believes the markets need regulating might be a good place to start. I wonder what Eliott Spitzer is doing?