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Washington’s worst dereliction of duty was its failure to enforce the laws on the book that could have helped prevent or mitigate the crisis.

The SEC was the weakest link - mostly by Congressional design - but also because it was a lax enforcer of laws against fraud and market manipulation.

Take the case of the naked short sellers that brought down Bear Stearns. On March 11, 2008, an unidentified party made a $1.7 million bet through put options that Bear Stearns would collapse within 10 days.

At the same time, rumors were widely circulated that Bear Stearns was out of cash even though they had $18 billion on hand. Investment funds began to pull out their brokerage accounts. In only few short, Bear Stearns was down to $2 billion in cash and on the verge of collapse.

More than ten million shares were sold into the market by “sellers” who did not own them or had not borrowed them, as required by law. This pushed Bear’s share price from $62 to $30.

Facing a sudden demise, Bear agreed to be sold to JPMorgan for $2 a share or $236 million, less than the value of its corporate headquarters. Meanwhile, the party who had place the $1.7 million bet made $271 million.

There was a SEC investigation of the naked short selling of Bear’s shares but not one was brought to justice.

While the collapse of Bears Stearns should have been a wake-up call to Chris Cox at the SEC and Hank Paulson at Treasury, no one took steps to prevent naked short selling from bringing other investment banks as the market now expected.

Only six months later in September 2008, naked short sellers struck again. They sold tens of millions of Lehman Brothers’ shares they did not own or borrow. In a matter of days they forced the company into bankruptcy, precipitating the financial crisis of 2008.

The SEC won’t even say if there was an investigation of the Lehman naked short sales. No one has been brought to justice.