The SEC Behaving Badly

While the SEC has not gone sufficiently crazy to start circulating videos of its staffers flashing the cameras, they do seem to have lost it in a big way. Last week, the SEC announced the settlement of a claim that it had against the state of New Jersey. According to the SEC, New Jersey sold billions of dollars of municipal bonds during the administration of governors Corzine and McGreavy without fully disclosing that the state could not fully fund its pension obligations without raising taxes. For its part, New Jersey agreed to settle the claim with a promise not to do it again.

This claim and settlement is a complete waste of taxpayers' money. The idea that anyone would buy or not buy minicipal bonds due to the underfunding of pension liabilities which could only be discovered through disclousre in prospectus is laughable. Anyone who has ever waded through the very lengthy prospectus issued at the time that the bonds are sold understands that most of what gets written in that document never, never gets read by anyone other than the proof reader. Further, one does wonder why the SEC thinks that only tax increases could lead to the ability to fund pensions. What about cost cutting. Governor Christie just cut the NJ budget from 39 billion to 28 billion. That is a reduction of close to 30%. Under the prevailing view at the Obama SEC, however, the only way to balance the budget is to raise taxes.

The truth is that we have just seen a great many public employees spend countless hours laboring to bring forth nothing more important than a cigarette butt. Great job SEC!