We have heard plenty about how deregulation contributed to the market crisis. Far less noted is what might be called de-supervision. Rather than the rollback of regulatory laws themselves, de-supervision refers to cutbacks and a shift away from enforcement at oversight agencies. (Thanks to economics and law professor Bill Black for suggesting the term.)

This month's Portfolio magazine has one of the best pieces we've seen on the trend, specifically the gutting of the SEC. According to Portfolio, Security Exchange Commission Chairman Chris Cox -- appointed by President Bush in 2005 -- has "engineered a series of procedural and tactical changes, effectively reducing the S.E.C. enforcement division's power."

"It was like someone poured molasses on the enforcement division," one former enforcement division supervisor told Portfolio.

Under rules cleared by Cox, professional enforcement staffers in some cases "no longer have the freedom to negotiate fines against public companies." Instead, the agency's commissioners decide the size of a fine. There are usually five commissioners. But the White House "delayed the replacement of two Democratic commissioners," and so for the first half of this year, there were only three commissioners, all Republican.

While enforcement was being scaled back, fines were plummeting. According to Portfolio, SEC penalties shrank from a high of $1.5 billion in 2005 to $507 million last year. (Cox told Portfolio the earlier numbers were one-time highs inflated by the Enron scandal.)

Meanwhile, Cox also imposed cuts at the SEC's "risk-assessment" office, which had been created by his predecessor to, as Portfolio puts it, "do a better job of anticipating financial upheavals." But apparently, watching out for a meltdown wasn't a high priority:

After the head of that office left, Cox didn't replace him for nearly two years. Although Donaldson had authorized and filled eight positions and planned to expand the staff to 15, by 2007 the office was staffed mainly by part-timers, who in federal budget records were regarded as the equivalent of only two full-time workers."

Instead of focusing on the big players on Wall Street, the SEC has taken to going after "what SEC lawyers consider petty-fraud cases, such as small Ponzi schemes."

Cox denies the changes mean the agency has scaled back its enforcement or become any less effective. "We are redoubling our efforts in every way that we know how," he told the magazine. "I spend more time on enforcement than on any aspect of my job."

Update: Earlier this month, the New York Times focused on the SEC's shaky oversight of the major investment banks.