That the SEC is the most incompetent, corrupt, irrelevant and captured organization "serving" the US public is known by everyone. And while the details of the SEC's glaring lack of capacity to do anything to restore investor confidence in the capital markets, which has become a casino used exclusively by Wall Street to defraud any retail investor still stupid enough to play (which lately a moot point as there have been no material retail inflows into mutual funds in over three years), are scattered, courtesy of Bloomberg we now have the best summary of just how the utterly clueless SEC is a muppet plaything of Wall Street, and together with it, the "grand regulation" that was supposed to keep Wall Street in check, is nothing but what Wall Street demand it to be, and forced the SEC, way over its head on regulation, to accept every change, that the very banks that are supposed to be regulated, demands as part of Dodd-Frank reforms. In short: everything we know about Wall Street 'regulation' has been a farce, and a lie, exclusively thanks to corruption rampant at the now documentedly incompetent Securities And Exchange Commission.

Bloomberg has the smoking gun.

It had been two days since U.S. lawmakers negotiated all night to finish rules that would reshape the business of Wall Street. The 20-hour session left legislators, aides, lobbyists and regulators exhausted. Almost no one had a grip on all the details. Then Annette Nazareth stepped in. That Sunday morning, she e-mailed a dozen Securities and Exchange Commission officials about the bill that would become the 2,300-page Dodd-Frank Act.

Who is Annette Nazareth?

Nazareth, herself a former SEC commissioner, represents the biggest banks and securities firms as a partner in the Washington office of Davis Polk & Wardwell LLP. She attached an annotated copy of the measure to her June 27, 2010, e-mail, marking changes made during the wee hours. It could be an invaluable tool for an agency hard-pressed to analyze the bill on a tight deadline.

Nazareth was the good Wall Street funded Samaritan that stepped into bail out the SEC in its moment of need.

“In case you would find it helpful,” Nazareth wrote to the group, many of them ex-colleagues. Two hours later, SEC Chairman Mary Schapiro responded: “Thanks. We have our work cut out for us.”

And who is Davis Polk:

With Nazareth on board, Davis Polk was hired as outside counsel on Dodd-Frank by the six largest U.S. banks and the Securities Industry and Financial Markets Association, the Wall Street trade group, according to the law firm’s website. The firm also performed work for foreign lenders including Credit Suisse Group AG (CS) and Deutsche Bank AG.

As for Dodd Frank it needs no introduction: it is the Wall Street sponsored abortion that assures nothing has changed on the TBTF front, that banks can do whatever they wish, and that the SEC is powerless to intervene even when necessary. As Elliott management said, Dodd Frank is the one piece of legislation that has assured the Lehman failure was merely an appetizer to the main course when massively undercatpitalized banks will be tumbling like dominoes in a centrally-planned world.

How did Bloomberg get its information:

Nazareth’s e-mails to Schapiro and then-SEC General Counsel and Senior Policy Director David Becker, obtained through a Freedom of Information Act request filed by Bloomberg News, demonstrate how lobbyists and lawyers draw on bonds they formed in government service to gain access for clients, and how they work to maintain those ties.

Everyone knows about the SEC's revolving door policy where former SEC workers go to Wall Street to aid and abet their clients to skirt the law, and avoid SEC entangements. It is rare however to see a double revolving door participant such as Nazareth:

Officials routinely leave federal agencies, Congress and the White House to work for the industries they once supervised. While that path is well-trod and legal -- with some time restrictions -- it still provokes handwringing in Washington. Nazareth’s communications provide an inside look at what happens when the revolving door spins. Nazareth, 56, declined to discuss specific e-mails. She said that people like herself who have worked for both sides are valuable because they can “better translate to their clients” what the SEC is trying to achieve. “It’s unfortunate where we are in an environment now where everybody thinks that is nefarious,” Nazareth said. Nazareth added that she “absolutely” doesn’t get favorable treatment. “I am not batting a thousand, let’s put it that way,” she said. “And I respect that.”

And here we get to the meat of things: Wall Street, via Davis Polk, and its "liason" lawyer, manipulated everyone like docile little muppets.

Nazareth and her colleagues at Davis Polk played a central role as the financial industry shaped its Dodd-Frank priorities, helping write more than 80 comment letters to regulators. The firm’s clients, including Sifma, JPMorgan Chase & Co. (JPM) and Bank of America Corp., targeted rules such as the so-called Volcker ban on proprietary trading, arguing it could create excessive burdens on banks, choke off business and hurt the economy. The Volcker rule has yet to be completed, along with other key Dodd-Frank components such as swap-trading and mortgage regulations, meaning the success of the banking pushback won’t be fully measured until next year at the earliest. In May, Nazareth was named as the top woman lawyer in financial regulation at the Americas Women in Business Law awards in New York. Public disclosures from the SEC also underline her clout. In 2009 and 2010, she attended 11 meetings with Schapiro -- twice as many as any single competitor in the law and lobbying business -- according to the chairman’s appointment calendar. Since Dodd-Frank was enacted, Nazareth has taken executives from firms including Goldman Sachs Group Inc. (GS) and Credit Suisse to the SEC, agency memos show.

Manipulating the SEC was not enough, Wall Street also had its tentacles at the CFTC, best known for such humiliations as MF Global and Peregrine Financial:

Nazareth has also attended meetings at the Federal Reserve and represents clients at the Commodity Futures Trading Commission, where she has met with Chairman Gary Gensler among other officials, according to public disclosures. Lynn Turner, a former SEC chief accountant who is critical of the banks’ agenda, said that Nazareth is “at the top of that list of influential attorneys” who have access to regulators as former SEC officials. John Nester, an SEC spokesman, said those who used to work at the commission don’t get special access to the chairman. Schapiro “knows a lot of people in government, law, academia and consumer advocacy” and it’s not surprising that she e-mails and meets with some of them, he said. “In the end, whether she or anyone in the agency agrees with a particular viewpoint or a specific request depends on whether it furthers the mission of the agency,” Nester said.

Nazareth's M.O. is well known to those who have worked on Wall Street - hollow empathy and pandering, just to gain the trust, allowing full out manipulation to ensue:

In her e-mails, Nazareth blended the personal and professional. For instance, she sympathized with Schapiro over a “frustrating” New York Times article in one message, and in another offered to sell the SEC a Davis Polk Web product “at an appropriate government rate.” The overlap was sometimes evident in Nazareth’s salutations, which varied from “Dear SEC friends” and “Dear Mary and David” to “Hello All.” On March 10, 2010, for example, she wrote to “Chairman Schapiro” asking if she’d take a meeting with Credit Suisse “to discuss the SEC’s concept release on equity market structure.” After Schapiro agreed, Nazareth wrote back: “Fantastic, Mary!” Schapiro answered the e-mails in a business-like way. The more numerous exchanges between Nazareth and Becker, who are friends, display an easy banter and a familiarity developed over the years. Becker, now a partner at the Cleary Gottlieb Steen & Hamilton LLP law firm in Washington, declined to comment for this story. His biography on the firm’s website says he was “intimately involved” in financial regulatory reform at the SEC and “served a central role in the commission’s efforts to implement the Dodd-Frank Act.” Early in the Dodd-Frank debate, in November 2009, Nazareth forwarded a summary of a Senate proposal to Becker, who noted that the actual text ran to 1,100 pages. “More nap time for me,” he wrote. That prompted Nazareth to ask, “Yea, but what about me? No rest for the outside counsel.”

There is much more in the full Bloomberg expose which is merely the latest nail in the coffin of the manipulated, coopted farce known as the SEC, which probably more than anything, is the reason why investors have now shunned the centrally planned capital marekts entirely. That Mary Schapiro is still employed as the SEC's head after years and years of abysmal decisions, of policy failures, of having done nothing to restore confidence in the market is, quite simply, a joke. This latest narrative will merely confirm it.

Sadly, in this banana republic which employs such banana agencies as the SEC to do the bidding of the banana elite that matters: not democrats, not republicans, but Wall Street's banks full of money (most of it from the trillions in 2008/9 taxpayer funded bailouts), nothing will ever change, until the next and final crash wipes out everything with it and forces the system to start afresh. Only by eliminating the status quo, its insidious tentacles, and the enture existing generation of corrupt, criminal, co-opted regulators, can there be a chance to restore some semblance of fair and efficient markets.

Until then, enjoy the farce of the broken Wall Street casino until trading volumes finally hit zero. It won't be long. At that point it will be too late.