In the January 2009 WSJ piece we find one possible reason the SEC hasn’t been more aggressive on Lehman: It’ll make Schapiro’s failures at FINRA (NASD’s successor, which she headed) look even worse:

But Lehman’s problems ran far deeper: not having enough capital and apparently carrying its huge holdings of complex mortgage securities on its books at too high a value.

People close to Ms. Schapiro say the Lehman mess and the broader mortgage meltdown occurred outside of what Finra inspects: brokerage accounts. But firms were selling the mortgage securities in brokerage accounts, to investors large and small. Finra is also responsible for seeing to it that the valuations of securities sold in brokerage accounts are accurate.

Joseph Mays Jr., a consultant to small broker-dealers and a former NASD examiner, says Finra should have scrutinized the mortgage-backed securities at the root of the crisis. “If I had to assign blame, I’d blame Finra and the SEC, but I’d blame Finra first because it’s the first line of defense,” he said.

The only thing worse than having no watchdog is the false security of having one—and then finding out it gums its Kibbles ‘n Bits.

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.