Another Worse Than Futile Governmental Charade

Another governmental agency responsible for protecting us engaged during the past week in a probably costly and certainly counterproductive bit of legerdemain that has become all too typical.

The Securities and Exchange Commission brought, and almost simultaneously settled securities fraud charges against the State of New Jersey for hiding the financial problems of the state and its public employee pension funds from investors to whom it was peddling bonds. 

What was being done by New Jersey was not unusual for states that have spent themselves into a financial abyss. As was noted in this Wall Street Journal report, "the National Association of State Budget Officers [has] admitted that states were employing 'creative innovative . . . adjustments' to budgets. They include financing current operations with debt, moving money from trust funds dedicated to specific tasks (like highway maintenance) into general funds, and pushing payments to vendors into future fiscal years." Take a look at the report for an outline of the chicanery's sordid details.

Ignore for the moment the interesting and noteworthy -- though unmentioned -- fact that no action comparable to that taken by by the SEC (purportedly to protect investors from such chicanery) ever has been taken or even contemplated against public officials who engage in fraudulent conduct to hoodwink the taxpaying and voting citizenry. The important point is that the SEC proceeding actually encourages and ensures the continuation of financial fraud by governmental units notwithstanding the agency's claim that it acted against New Jersey to deter financial fraud by states by making it clear that such dishonesty would not be tolerated, 

First, consider that neither the state nor any governmental unit can be jailed. Nor would imposing a fine against a governmental body as a fine would punish only the taxpayers. The action resulted only in an order for the state not to transgress in the future. What if it does? Imprisonment still would be impossible and a fine still would be senseless. So where is the deterrent?

More importantly, a state can act only through and by the conduct of supposedly accountable individuals in supposedly responsible positions. But the SEC took no action against any of the individual New Jersey office holders responsible for the reprehensible conduct for which they were responsible even though the agency typically seeks and obtains the imposition of heavy fines and prison terms against executive and financial officers of private corporations who have engaged in similar conduct.

The lesson of the whole episode is that financial fraud by public office holders is just fine and dandy and will go unpunished. Meanwhile those in the private sector can just go on paying the bills, continue carefully minding their Ps and Qs, and diligently dotting all the Is and crossing all the Ts, while wondering about the resources that the SEC expended on the New Jersey charade.

The whole episode brings to mind a wonderful story about the Micky Mouse vs. Minnie Mouse divorce case in which Micky's lawyer is telling the judge that his client no longer can live with Minnie because she has become insane. Micky stops the argument by telling his lawyer that Minnie isn't crazy only to have lawyer respond that he is just arguing the case the Micky brought to him. Micky answers:

I never told you that Minnie is crazy. 
What I said is that she is f _ _  king Goofy.