In their excellent article, “How To Fix a Broken Financial World”, Michael Lewis and David Einhorn outline 4-5 key changes that would make a world of difference at relatively low cost. One of the most important recommendations is pasted in summary below:
“Close the revolving door between the S.E.C. and Wall Street. At every turn we keep coming back to an enormous barrier to reform: Wall Street’s political influence. Its influence over the S.E.C. is further compromised by its ability to enrich the people who work for it. Realistically, there is only so much that can be done to fix the problem, but one measure is obvious: forbid regulators, for some meaningful amount of time after they have left the S.E.C., from accepting high-paying jobs with Wall Street firms.”
The truth is many senior SEC officials take jobs with the firms they regulate to make money by helping those firms avoid the rules, which as Peter Goodman says in “Rule No. 1: Make Money Avoiding the Rules” is the one of the key methods employed by Wall Street to juice profits.
If you don’t believe it happens, here is one documented example: “In Through The Out Door“.