The Securities and Exchange Commission, panned by Congress for its handling of a trading probe that entangled Morgan Stanley CEO John Mack, is now under investigation from the Government Accountability Office, reports Bloomberg.

This comes after questions raised by requests by Senator Charles Grassley whether the agency gave the politically well-connected Mack, a major fund-raiser for President Bush's 2004 campaign, special treatment, or turned a blind eye to some suspicious trades. The allegations of political interference were raised by Gary Aguirre, a former SEC investigator, and reported in the New York Times which we have here via the International Herald Tribune.

It's the hottest political temperature the SEC has come under since Christopher Cox took over as its chairman in August 2005, and there are serious questions about what might be revealed.

The SEC brought 10 per cent fewer enforcement actions in 2006, reports the Wall Street Journal.

Although as the WSJ points out, it's hard to find anyone who will say the SEC is slacking off. Nonetheless, there are suggestions that some of its official might be playing it safe. Still, it's hard to reconcile the alleged slackness with claims by the U.S. Chamber of Commerce earlier this year that the SEC was being too punitive.

Still, the SEC might have been travelling down this direction for some time. Earlier this year, the GAO issued a report slating the SEC for poor internal controls and slack systems.

I explore that here.