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The Securities and Exchange Commission today held its first policymaking session of the year, and under political pressure, introduced several proposals to restrict the short-selling of stock that many economists, including those inside the agency, say are likely to have little effect.

In a stunning rebuke, the Securities and Exchange Commission chairman blames his career regulators for a decade-long failure to investigate Wall Street money manager Bernard L. Madoff, now accused of running one of the largest Ponzi schemes ever.

On Tuesday night, SEC Chairman Christopher Cox ordered an internal investigation of what went wrong and offered a scathing critique of the conduct of his staff attorneys. He said they never bothered to seek a formal commission-approved investigation that would have forced Madoff to surrender vital information under subpoena. Instead, the staff relied on information voluntarily produced by Madoff and his firm.

Credible and specific allegations regarding Madoff's financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, said Cox.

A former SEC attorney, Eric Swanson, married Madoff's niece, Shana, last year, The Wall Street Journal reported. The SEC's compliance office issued a statement Wednesday saying that Swanson was part of a team that looked into Madoff's securities brokerage operation in 1999 and 2004. The SEC cited its "strict rules" prohibiting employees from participating in cases involving firms where they have a personal interest.

The SEC's inspector general, David Kotz, told the Journal that he intends to examine the relationship between Madoff's niece and Swanson.

Madoff remains free on $10 million bail. A hearing is scheduled in federal court in New York on Wednesday afternoon to iron out the terms of his bail package.

Shock waves from the Madoff affair have radiated around the globe as a growing number of prestigious charitable foundations, big international banks and individual investors acknowledge falling victim to an unprecedented fraud.