Lawmaker slams SEC for lax oversight

WASHINGTON (Reuters) - A senior U.S. lawmaker is accusing the U.S. Securities and Exchange Commission of lax oversight that contributed to current market turmoil.

Democratic Rep. Edward Markey sent a letter on Wednesday to SEC Chairman Christopher Cox asking him to explain what steps the agency will take to fully use its authority to assess risk granted under the 1990 Market Reform Act that Markey helped author.

Markey was reacting to a report released on Friday from the SEC's internal watchdog that said the agency failed to adequately supervise investment bank Bear Stearns.

Bear Stearns has since been sold to JPMorgan Chase & Co (JPM.N) in an emergency rescue sale brokered in March by U.S. officials.

The market reform law requires broker-dealers to report to the SEC any information about the underlying stability of the broker-dealer.

"The fact that Bear Stearns was compliant with the SEC's requirements, yet disastrously collapsed nonetheless, is an example of what a joke SEC's risk assessment efforts have become," Markey, from Massachusetts, said in a statement.

Last week, the SEC ended its program to supervise the largest independent investment banks. The five banks have either collapsed or reorganized as commercial banks.

SEC's Cox had been urging Congress to give the agency explicit authority to oversee the banks, which were subject to voluntary supervision.

Cox said it was clear that voluntary regulation does not work and said the agency would look closely at the inspector general's recommendations and implement them.

(Reporting by Rachelle Younglai; Editing by Tim Dobbyn)