There's Something About Mary

When securities regulators head to the Hill later today for a hearing before the House Financial Services Committee, the questions about who knew what about Bernie Madoff's operations when will surely be fired off with a dash of vitriol.

But one regulator won't be forced to answer those questions just yet: Mary Schapiro, Barack Obama's pick for new S.E.C. chairman. Rest assured, her time will come.

Schapiro runs Finra, the brokerage industry's self-regulatory organization. Since Bernard L. Madoff Securities was a registered broker-dealer, Finra was at least partially responsible for policing its operations.

According to a story in the Wall Street Journal today, regulators including the S.E.C. and Finra examined Madoff's firm no less than eight times during the past sixteen years, and they found only minor violations. Indeed, in 2007, Finra's full-scale investigation of Madoff's firm concluded that "it violated technical rules and failed to report certain transactions in a timely way," according to the Journal.

This revelation will almost certainly cast Schapiro's nomination as S.E.C. chair in serious doubt. It is understandable that Congress should skewer the outgoing leaders of an S.E.C. that failed time and again to uncover this massive fraud. It is almost unfathomable that it should welcome an incoming S.E.C. leader who also failed to do so.