“The last six months have made it abundantly clear that voluntary regulation does not work. The fact that investment bank holding companies could withdraw from this voluntary supervision at their discretion diminished the perceived mandate of the CSE program, and weakened its effectiveness.
“As I have reported to the Congress multiple times in recent months, the CSE program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily.
“The Inspector General of the SEC today released two reports on the CSE program and its supervision of Bear Stearns, and those reports validate and echo the concerns I have expressed to Congress. The reports’ major findings are ultimately derivative of the lack of specific legal authority for the SEC or any other agency to act as the regulator of these large investment bank holding companies.
“The Inspector General's office also made a number of specific recommendations to improve the CSE program, which are comprehensive and worthy of support. Although the CSE program is ending, we will look closely at the applicability of those recommendations to other areas of the Commission's work and move to aggressively implement them.”