The U.S. Securities and Exchange Commission seal hangs on the facade of its building in Washington, D.C.
The U.S. Securities and Exchange Commission seal hangs on the facade of its building in Washington, D.C. - 
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Kai Ryssdal: Banking regulators and other government officials took their turns in the hot seat today in front of the Financial Crisis Inquiry Commission. Federal Deposit Insurance Commission Chairwoman Sheila Bair said that she and her colleagues at other agencies, they just flat blew it. Booming bank profits and a rising economy, she said, made it tough to get tough.

Securities and Exchange Commission chief Mary Schapiro said the SEC wasn't successful in keeping an eye on the big Wall Street banks. But the SEC is going to roll out a well-tested tactic in the fight against corporate crime. From Washington, Brett Neely reports.

BRETT NEELY: The SEC is looking for a few good informers. At a press conference yesterday, SEC enforcement head Robert Khuzami said the agency would begin offering immunity in some cases.

ROBERT KHUZAMI: When you engage in misconduct, you now have to think even harder about the possibility of others coming forward to report to the SEC your secret conversations, your hushed plans, your schemes and your deceptions.

Duke Law professor James Cox thinks the government will have an easier time convincing potential witnesses to cooperate now.

JAMES COX: 'Cause it's always been sort of a question mark, if I turn my guy in, what am I going to get?

Corporate insiders who sing will get charges dropped or reduced in exchange for their testimony. And help out the SEC.

COX: They're understaffed here. They really do need to have somebody inside the bastion of violations to cooperate and help them with the investigation.

He says the Bush administration wasn't interested in tough regulation. That meant spectacular scams like the Madoff Ponzi scheme were missed, says Ellen Podgor at Stetson University's College of Law.

ELLEN PODGOR: Just reading the Madoff report, it's very clear that it was a system that was not functioning properly.

The Obama administration is beefing up the SEC. But an infusion of money and lawyers still won't work without informers, say experts. Particularly as financial markets and financial scams get more complicated.

In Washington, I'm Brett Neely for Marketplace.