Reid criticizes federal watchdogs in investment fraud case

WASHINGTON -- Sen. Harry Reid, D-Nev., said this afternoon that federal watchdogs were "asleep at the wheel" while Wall Street financier Bernard Madoff was alleged to be committing possibly history's largest investment fraud.

Reid stopped short of calling for the resignation of Christopher Cox, the chief regulator at the Securities and Exchange Commission. But Reid added he knew Cox and "I don't think he is going to make the All-Star team."

"I am not going to get into telling (President-elect Barack) Obama who he should hire or fire," Reid said.

Reid, the Senate majority leader, was asked about the Madoff scandal during a conference call with Nevada reporters. The financier stands accused of operating a Ponzi scheme that he told several employees had lost $50 billion for clients of his investment-advisory firm.

Reid said the scandal was symptomatic of the nation's financial woes stemming from an "anything goes" mind set on Wall Street and in the Bush administration.

Reid said even a "die hard Republican," Terry Lanni, who until recently was the chief executive officer of MGM Mirage in Las Vegas, called him "and said we have to start regulating again."

"I am not for over-regulation," Reid said. "I am for modest regulation, and people are crying for that now."

A Ponzi scheme is an investment fraud that pays high returns to investors out of the funds paid by subsequent investors, rather than from the fruits of any real business.

The fraud has raised questions as to how Madoff, who had been a respected investment manager for years, could have avoided detection by the SEC.

Cox, the SEC chairman, this week acknowledged the agency missed multiple chances to investigate complaints against Madoff filed as far back as 1999.