In its zeal to apply a free market philosophy to the Securities and Exchange Commission, the Bush administration created an environment where the agency's enforcement staff was unable to take definitive policy positions or bring enforcement actions, according to Mercer Bullard, associate professor of law at the University of Mississippi School of Law.Testifying on May 7 at a Senate Banking subcommittee hearing, Mercer said that the problems at the SEC reflect a state of "deregulatory capture," where the commission was unaware of and unable to respond to many enforcement matters before they surfaced.

The enforcement division's effectiveness has been compromised by "a lack of resources and poor leadership by the commission itself," said Bullard, adding that the Commission has abdicated its policymaking responsibilities to state regulators and private litigants in a number of areas. "The result has been a decline in public confidence in the markets, a reduction in investor protection, and an increase in uncertainty regarding applicable legal standards."

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