Just when you thought your opinion of the SEC couldn’t get any lower, the Washington Post goes and looks at an inspector general’s report on how the hapless agency botched the Allied Capital case.

Allied Capital had accounting, um, irregularities. Hedge-fund manager David Einhorn called the company out in 2002 and shorted its stock. The SEC went after Einhorn and left Allied Capital virtually untouched until 2007.

Here’s how it worked:

Without any specific evidence of wrongdoing, Allied met with SEC investigators in June 2002 to urge them to investigate Einhorn. Shortly thereafter, the SEC opened a probe, questioning Einhorn about his trading activities, subpoenaing documents, and seeking his telephone records and a list of clients.

And, perhaps, why:

The probe was supervised by an enforcement bureau chief named Mark Braswell; he soon left the agency and went to work a Washington law firm, where he landed Allied Capital as a client.

That isn’t the only time the revolving-door problem comes up in the report:

One OCIE official overseeing the review told the inspector general that he trusted an Allied officer contacted because that person formerly worked for the SEC and was “not going to be doing anything illegal.”

— What lengths will Rupert Murdoch go to support his newspapers?

Last year, The Wall Street Journal lost $80 million. The New York Post lost an estimated $70 million. And we find out today that The Times of London and Sunday Times lost a staggering $132 million last year.

Four papers, $282 million in losses. While in the short-term we’re glad such largesse is keeping journalists in jobs, such losses aren’t sustainable for long.

— John Hempton wrote an outstanding post the other day pointing out that it sure looks like too-big-to-fail Bank of America used accounting tricks similar to the infamous Repo 105 shell game at Lehman Brothers:

Repo 105 is fraud. Its a lie to investors and rating and regulatory agencies. It was also fraud when BofA did it. But both Lehman and Ken Lewis compartmentalized it as OK. And it was not the fraud that undid them – it was the overweening arrogance that thought this was alright. The same overweening arrogance that made Ken Lewis think it was alright to pay a big premium to close for Merrill Lynch (and later force mass dilution of BofA common shareholders).

Today, ProPublica follows up with Bank of America and gets this statement:

“Efforts to manage the size of our balance sheet are routine and appropriate, and we believe our actions are consistent with all applicable accounting and legal requirements.”

In other words: “Yep, we did it. So?”

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.