Harvey Pitt on Individual Investors: Let Them Eat Cake

Former SEC chairman Harvey Pitt was no champion of individual investors. Pitt was in charge of the agency when the former New York Attorney General put the SEC to shame and took the lead in exposing Wall Street's conflicted research. Pitt was also among the regulators who signed off on Spitzer's wrist-slapping $1.4 billion global settlement.

So I guessed I should not have been surprised to hear Mr. Pitt tell CNBC viewers today that the Supreme Court's recent Stoneridge decision, which prevents investors from suing all parties involved in a fraudulent transaction and not just those who directly initiated it, would have no bearing on investors seeking legal recourse relating to the subprime mortgage meltdown. Mr. Pitt said that there were already enough primary violators to sue.

Mr. Pitt is badly mistaken. The Stoneridge decision will adversely affect the legal recourse available to subprime investors, as many potential avenues for discovery – where "smoking guns" are often discovered &ndash are now closed. My guess is that if CNBC had also asked Mr. Pitt about the Supreme Court's Tellabs decision, which requires "a strong inference of fraud" before a class action suit can be certified, he wouldn't have had any issues with that ruling either.

Credit Mr. Pitt at least for one thing: at least the regulatory lightweight's longstanding indifference to the issues and concerns of individual investors remains intact.