From: *Travis*
Date: Wed, Dec 24, 2008
Subject: The SEC's Next Shoe
*The SEC's Next Shoe*
By Frank J. Gaffney Jr.
<http://www.frontpagemag.com/Articles/authors.aspx?GUID=777155f6-10ca-47ff-a8f0-2e9b5d652071>
*Washington Times | Wednesday, December 24, 2008 *
http://www.frontpagemag.com/Articles/Read.aspx?GUID=F87B5C35-2101-4DFD-854F-206AF2A69660
The Securities and Exchange Commission has had a very bad couple of months.
As a result of its successive oversight failures and selective enforcement
of the nation's securities laws and regulations, so have the nation's
financial sector, economy and taxpayers. Unfortunately, there is reason to
believe that the SEC has another - and potentially even more problematic -
"shoe" about to drop.
First, there were the successive meltdowns of publicly traded financial
corporations for which the SEC must bear some measure of responsibility. As
the Associated Press put it, the agency's own "inspector general determined
that the agency's monitoring of the five biggest Wall Street firms, which
included Bear Stearns, was lacking." Everyone also recalls Warren Buffet's
warning that derivatives such as subprime mortgage securities were
"financial products of mass destruction."
Then came last week's revelations by the SEC's chairman, former California
Rep. Christopher Cox, that the agency had repeatedly had "credible and
specific allegations" brought to its attention "since at least 1999"
concerning the self-confessed shyster-financier Bernard Madoff. Had the
staff of the SEC (which included an attorney married to Mr. Madoff's niece)
not persistently looked the other way, these warnings should have been
sufficient to prevent what ultimately became a ruinous $50 billion Ponzi
scheme.
The next fiasco for the Securities and Exchange Commission may prove to be its
systematic failure to address the insinuation into the U.S. capital markets
of financial products that, by their reckoning, do not conform to American
securities laws and regulations. These products have come to be known
collectively as Shariah-Compliant Finance (SCF) and further threaten what is
left of the integrity of our free market system. Worse yet, they - and the
theo-political-legal doctrine, Shariah, from which they spring - pose a real
threat to our society and form of government, as well.
Just as with Bernie Madoff and the subprime fiasco, the SEC has been warned
about SCF. A legal memorandum prepared last spring for the Center for
Security Policy by David Yerushalmi, an attorney specializing in securities
law, determined that Shariah-Compliant Finance entails both civil liability
and criminal exposure. These risks arise principally from the inherent
character of what authoritative Islam calls Shariah. It espouses, among
other unsavory things, the establishment of a global theocracy through the
violent overthrow of all other governments, including that of the United
States.
Specifically, the study found that SCF operates as a kind of "black box"
whereby Shariah advisers - some of whom describe their business as an
instrument of "financial jihad" - operate in a highly non-transparent manner
and investors are denied the disclosure and accountability to which they are
entitled. Consequently, Shariah-Compliant Finance involves some or all of
the following crimes: racketeering, antitrust, securities and consumer
fraud, material support for terror and sedition.
The results of this study were briefed earlier this year on two separate
occasions to SEC officials, without apparent effect. The lack of response
prompted a senior member of the Senate Finance Committee, Sen. Jon Kyl,
Arizona Republican, to write the SEC chairman on Aug. 14 asking a series of
pointed questions about Shariah-Compliant Finance and seeking an assessment
of the issues raised by the Yerushalmi memorandum. (The senator, who is
second-ranking Republican in the Senate, also sent similar letters to
Federal Reserve Board Chairman Ben Bernanke, Treasury Secretary Henry
Paulson and Attorney General Michael Mukasey.)
On Oct. 6, Mr. Cox replied with a letter that can only be described
charitably as a non-answer. With the assurance that, "the SEC vigilantly
investigates potential violations of laws and enforces them vigorously," the
commission chairman averred that "U.S.-registered issuers offering SCF
products must comply fully with the applicable disclosure requirements of
the federal securities laws." The same could have been said of Bernie
Madoff, Bear Sterns and AIG, to name just a few.
Mr. Cox also sought to allay Mr. Kyl's concerns by serving up a report on
Islamic finance by the International Organization of Securities Commissions.
This document simply reflects the same myopic view taken by the SEC and
other U.S. government agencies: It fails to address the incompatibility of
Shariah with not just Western financial institutions but with our political
system and legal code.
The truth of the matter is that the Bush administration - led by the
Treasury Department - and apparently even the SEC's regulators have been
completely preoccupied with shoring up the beleaguered U.S. financial
sector. One way to do that has been by recycling petrodollars now in the
hands of Shariah-promoting states like Saudi Arabia and others in the
Persian Gulf.
This requires, however, that official Washington ignore the real national
security risks associated with allowing sovereign wealth funds, governments,
princes and others bent on insinuating Shariah into America to exercise
growing control over the capital and credit flows of our markets. To the
extent that the U.S. government now owns and controls many of the financial
institutions offering SCF products, such conduct is not only enabling
seditious behavior. It explicitly violates the Constitution's establishment
clause which prohibits state sponsorship of or preference for any religion.
(As noted in this space last week, U.S. ownership of a Shariah-compliant
subsidiary of the giant AIG insurance conglomerate has already prompted a
federal lawsuit on these grounds.)
The highly publicized past failures of the Securities and Exchange
Commission may prompt its dismantling or reorganization by the new Obama
administration and 111th Congress. The SEC's next shoe to drop - namely, its
failure to enforce the body of laws and regulations that would preclude
Shariah-Compliant Finance in this country - may, unless corrected forthwith,
contribute materially to Shariah adherents' efforts to dismantle the United
States.
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