Is this important?
"The Bear Stearns situation highlighted several apparent anomalies in the U.S. regulatory structure. The SEC lacked safety and soundness powers over the institutions it supervised, while the Fed was forced to commit funds to an investment bank over which it had no regulatory
jurisdiction. The anomaly became even more pronounced when the Fed subsequently established a lending facility to provide short-term credit to other investment banks.
The Bear Stearns collapse showed the inability of the SEC to respond to a brokerage failure with systemic risk implications. There is more to the story, however, than the differences between bank regulation and the SEC’s net capital rule. In 2004, the SEC devised a voluntary supervisory
scheme for the largest investment banks, called the Consolidated Supervised Entities (CSE) program. The CSE firms were all registered broker/dealers, but were also large holding companies with extensive operations carried on outside the broker/dealer unit. Thus, the SEC had
no capital requirement that applied to the entire investment bank. Under CSE, this was to change: as a substitute for the net capital rule, the firms agreed to abide by the Basel risk-based standard,
and maintain that level of capital at the holding company level. On a voluntary basis, the firms agreed to grant the SEC the authority to examine and monitor their compliance, above and beyond the SEC’s explicit statutory authority.
Whatever the intent of the CSE program, it did not succeed in preventing excessive risk-taking by the participants. By the end of September 2008, all five CSE investment banks had either failed (Lehman Brothers), merged to prevent failure (Merrill Lynch and Bear Stearns), or applied for bank holding company status (Morgan Stanley and Goldman Sachs).18 On September 26, 2008, SEC Chairman Cox announced the end of the CSE program, declaring that “[t]he last six months have made it abundantly clear that voluntary regulation does not work. When Congress passed
the Gramm-Leach-Bliley Act, it created a significant regulatory gap by failing to give to the SEC or any agency the authority to regulate large investment bank holding companies." http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/R40249_12142009.pdf