IN's Pavia: Congress must stay focused on financial reform

With so many issues to debate in connection with the pending financial reform bill, it seems odd that some congressional Republicans are transfixed by the online porn habits of some members of the SEC staff. The pornography issue certainly deserves attention. No one can argue that anything good results from Securities and Exchange Commission employees viewing porn on the taxpayer's dime. Aside from the character questions such activity raises, you wonder how much time was wasted by the SEC employees involved. Republicans in Congress voiced their outrage and are now saying that this proves that the SEC shouldn't be given new regulatory power. The porn story has apparently become the latest GOP salvo in its efforts to thwart President Obama's attempts to reform Wall Street and the financial industry. Some have gone so far as to say that reform should be put on hold. Although I understand everyone's disgust with porn-watching SEC employees, I must challenge the timing and intensity of the outrage. The truth is that this embarrassing story was first brought to the public's attention in February. At that time, SEC inspector general David Kotz unveiled the results of an investigation which found that dozens of employees had looked at explicit images over the past five years. A Google search will show that news reports of Internet sex-surfing by SEC employees appeared months ago. Curiously, that old report received new life only after the SEC's April 16 vote to act against financial powerhouse The Goldman Sachs Group Inc. At the recent request of Sen. Charles Grassley, R-Iowa, Mr. Kotz put together a memo detailing the findings of the porn-watching investigations over several years. Here is the question raised by political pundits: Is it a coincidence that the SEC's porn problem has resurfaced in the headlines after Mr. Grassley, a Republican, requested a report from the inspector general? Ironically, less than a week after news of the Goldman complaint broke, ABC News reported on the SEC porn memo, which was released by Mr. Grassley. Rep. Darrell Issa, R-Calif., seized the opportunity as evidence that reform should be put on hold. “This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority,” he said, according to published reports. The publicity over the SEC's porn-watching employees proves no such thing. Common sense says that the entire SEC staff shouldn't be painted with the same brush. The curious timing of the porn revelations makes one stop and ask whether the re-emergence of the story is political payback for the SEC's fraud suit against Goldman. When the complaint was reported, Republicans focused their outrage, not on Goldman, but on the SEC and the White House, accusing them of timing the fraud complaint to bolster support for financial reform. Mr. Issa, who blasted the SEC for the timing of the charges against Goldman, said that it is “disturbing that high-ranking officials within the SEC were spending more time looking at porn than taking action to help stave off the events that put our nation's economy on the brink of collapse.” The inspector general's memo referred to the activities of SEC contractors as well as staffers and totaled up the number of individuals involved at 33. That is out of more than 3,500 SEC employees. Although these are serious violations revealing a clear failure of oversight, the wrongdoers represent less than 1% of the entire SEC staff. The SEC's inability to prevent a few dozen morons from watching porn is an issue separate and distinct from the commission's role in the nation's financial crisis. Enough is enough. Let's stick to the business at hand. The Democrats' agenda focuses on bank reform, stronger consumer protections, requirements that banks renegotiate mortgages for families facing foreclosure, limits on the size of banks and new regulations on swaps and derivatives. The Republicans argue that the proposed reform could lead to another bailout. If that is the case, let them explain their rationale and come up with a plan that helps ensure that we don't face bailouts. Americans want their leaders to fix the financial system and prevent another crisis. Let's not let porn divert Congress from its serious job. [Jim Pavia is the editor of InvestmentNews.]