During this week's Financial Services Committee hearing I heard testimony from Harry Markopolos and officials from the Securities and Exchange Commission. From May 2000 through April 2008 Mr. Markopolos, an industry whistleblower, made contact with the SEC nine times and issued several reports to convey his belief that Bernie Madoff's investment scheme was, in fact, a fraud.

The hearing did not discuss how we would stop all fraud, it discussed THE greatest fraud on record. And because of it, the damages to the confidence in the system are untold.

The $50 billion ponzi scheme undertaken by Bernie Madoff is the latest in the long list of reasons why we need to overhaul our regulatory structure overseeing the financial sector. Bernard L. Madoff Investment Securities LLC was examined at least eight times in 16 years by the SEC and other regulators.

The SEC definitely dropped the ball on the Madoff case.  In part, because of the "over-lawyering" at the SEC, as described by Mr. Markopolos.  On several occasions he attempted to explain to SEC officials, in detail, why Mr. Madoff's returns were simply not possible given his investment strategy.  Mr. Markopolos noted (and SEC officials later affirmed in their testimony) the lack of understanding within the SEC of some of the more intricate aspects of our financial markets is a serious problem.

We have to re-engineer the SEC going forward so that future egregious, preventable cases of fraud can be prevented.

Following the collapse of the British bank Northern Rock, The Financial Services Authority (England's financial regulator) hired individuals with work experience in the financial sector that were better suited to understand and address the complexities within the market.  As we look toward reforming our financial services regulators, I think this would be a useful example to keep in mind.