History's Biggest Ponzi Scheme

The Bernard Madoff fraud is deeply puzzling on many levels. One of the most troubling questions is how he got away with it.
SEC Chairman Christopher Cox has issued an extraordinary statement on how the Commission could have missed the biggest Ponzi scheme in history:

Since Commissioners were first informed of the Madoff investigation last week, the Commission has met multiple times on an emergency basis to seek answers to the question of how Mr. Madoff's vast scheme remained undetected by regulators and law enforcement for so long. Our initial findings have been deeply troubling. The Commission has learned that credible and specific allegations regarding Mr. Madoff's financial wrongdoing, going back to at least 1999, were repeatedly brought to the attention of SEC staff, but were never recommended to the Commission for action. I am gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate these allegations or at any point to seek formal authority to pursue them. Moreover, a consequence of the failure to seek a formal order of investigation from the Commission is that subpoena power was not used to obtain information, but rather the staff relied upon information voluntarily produced by Mr. Madoff and his firm.

The failure to detect one of the biggest frauds in history demanded attention, even before the announcement that the SEC had missed specific warnings about Madoff's machinations.
Update: I've got more on the unfolding Madoff scandal over at the Guardian.