An internal memo written by SEC Inspector General David Kotz said 33 commission regulators downloaded the sexually explicit images on government time during a period when the financial markets were in peril and ultimately sent the economy into the worst crises since the Great Depression 70 years ago.
The leaked memo written at the request of an inquiry by Sen. Charles Grassley (R-Iowa) was first reported by ABC News, followed by CNN, the Associated Press and a number of websites including The Daily Beast.
Among the findings:
- A senior attorney at the SEC's Washington headquarters spent up to eight hours a day looking at and downloading pornography. When he ran out of hard drive space, he burned the files to CDs or DVDs, which he kept in boxes around his office. He agreed to resign, an earlier watchdog report said.
- An accountant was blocked more than 16,000 times in a month from visiting websites classified as "Sex" or "Pornography." Yet, he still managed to amass a collection of "very graphic" material on his hard drive by using Google images to bypass the SEC's internal filter, according to an earlier report from the inspector general. The accountant refused to testify in his defense and received a 14-day suspension.
- Seventeen of the employees were "at a senior level," earning salaries of up to $222,418.
- The number of cases jumped from two in 2007 to 16 in 2008. The cracks in the financial system emerged in mid-2007 and spread into full-blown panic by the fall of 2008.
The first Congressman to comment on the memo was Rep. Darrell Issa (R-Calif.), ranking minority member of the House Committee on Oversight and Government Reform. “It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation’s economy to the brink of collapse,” he said.
Salaries of the 33 SEC staff ranged between $99,000 and $223,000.
Investors and consumers lost trillions of dollars beginning with the housing market bubble bursting in 2007 that triggered the financial market collapse in September 2008.
A word of caution. Although this is a news story because of its sexually suggestive content, it is only one tiny piece of the puzzle now being reconstructed on the events that plunged the nation into a catastrophic recession. The conduct of the SEC transgressors represents the complacent culture for lax regulation by the government watchdog agencies influenced by policies and a laize faire attitude -- from top Congressional leaders of both parties and presidential administrations dating back to Ronald Reagan. They were the enablers for the Wall Street unabated risk takers. This story represents a picture of Nero fiddling while Rome burned.
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