Lehman's 'regulators' weren't regulators at all

In fact, they were just the opposite.

Bloomberg:

The SEC’s examiners at Lehman didn’t belong to the agency’s ranks of investigators and disclosure specialists. Instead, they were part of the Consolidated Supervised Entities program, set up in 2004 to guard against the collapse of systemically important bank holding companies including Goldman Sachs Group Inc., Morgan Stanley, Bear Stearns Cos. and Merrill Lynch & Co.

The unit primarily monitored Lehman for financial or operational weaknesses. The agency’s hallmark mandate is investor protection.

A week after Lehman’s collapse, then SEC-Chairman Christopher Cox testified to Congress that the CSE program was fundamentally flawed. No law authorized the voluntary program to prescribe a companywide liquidity level or enforce SEC leverage requirements, he said. The SEC announced Sept. 26, 2008, the program was ending.

“It looks like the SEC was behaving much like a bank regulator and trying to avoid public disclosure of information which could encourage either raids, short selling, or possibly a run on the bank,” Coffee said. “I think the SEC got itself compromised here.”