What Madoff and the SEC tell us about government regulation

So from the coziness of federal prison, Bernard Madoff wonders how he got away with it so long, and blames the ineptitude of the SEC.

Under both Democratic and Republican administrations, the SEC didn't do much.

In the interview, Mr. Madoff said that the young investigators who pestered him over incidentals like e-mail messages should have just checked basics like his account with Wall Street’s central clearinghouse and his dealings with the firms that were supposedly handling his trades.
“If you’re looking at a Ponzi scheme, it’s the first thing you do,” he said....

Mr. Kotz’s 10-month investigation of how the commission handled, and mishandled, numerous tips and warnings it received about Mr. Madoff over the years. His full report,released last month, found the agency had received six substantive complaints since 1992 — and botched the investigation of every one of them.

So, from the perspective of a deep recession caused largely by Wall Street firms, what do we know? (a) deregulation doesn't work, because Wall Street firms will sell anything that will give them a bonus this year, and (b) over time, regulatory agencies get inept and go through the motions, finding technical violations but not the real crimes.

[It's at this point that I should type out my solution to this issue. Still working on that. Feel free to put in your own.]