LONDON - COMMENTATORS sharply criticised the US financial system Tuesday as more firms announced losses in the suspected multi-billion-dollar swindle run by ex-Wall Street heavyweight Bernard Madoff.

A day after Spain's biggest bank Santander announced exposure of more than US$3 billion ($4.44 billion) to Madoff Investment Securities in New York, the Spanish press led the charge.

"The supposed meticulous supervision by the SEC (US financial watchdog) has failed in the task of preventing massive fraud," Spanish newspaper El Pais said Tuesday.

"It must be asked how it is possible that no one had detected anything abnormal about his activities," said the newspaper La Vanguardia.

Madoff, 70, was arrested Thursday and allegedly confessed to defrauding investors of US$50 billion in a scam that collapsed after clients asked for their money back due to the global financial crisis.

US authorities allege that Madoff delivered consistently strong returns to clients by secretly using the principal investment from new investors for payments to other investors, in what is known as a pyramid scam.

US Vice President Dick Cheney said in a radio interview Monday that the alleged scam was "very disturbing" and blamed a few "bad apples".

But Jean-Pierre Jouyet, France's former European affairs minister who has just taken over the reins at France's financial markets watchdog the AMF, said Tuesday:

"For the fourth time, American regulation is in question." He cited three previous crises: the 1998 collapse of US hedge fund managers LTCM; the 2001 false-accounting scandal involving energy giant Enron; and the collapse in September of the Lehman Brothers bank.

Howard Wheeldon, senior strategist with BGC Partners in London, recalled former British prime minister Ted Heath's description of a previous financial scandal as the unacceptable face of capitalism.

"I choose to call this the unacceptable face of human greed," Wheeldon wrote Tuesday.

British investment consultants PIRC conceded that regulation seemed to be part of the problem, but pointed out that many of those hit by the scandal were professional investors.

"We therefore might also ask what financial institutions actually do for their management fee if being able to spot, and avoid, a pyramid scheme isn't part of the service?" it wrote in its newsletter Tuesday.

Already Monday, Dominique Strauss-Kahn, director general of the International Monetary Fund, had expressed shock that US regulators had failed to spot the red flags.

And US Republican Senator Chuck Grassley said the Securities and Exchange Commission had let down the American people.

"They failed. This person was registered as a broker dealer, they should have known what he was doing all the time, and particularly if you have whistleblowers."

Another four Japanese financial firms meanwhile joined the growing list of those caught up in the scandal that already includes some of the world's largest banks.

Japan's Aozora Bank said its exposure might amount to 12.4 billion yen ($200 million). Japanese insurers Nipponkoa Insurance Co. and Mitsui Sumitomo Insurance Co. said they might have lost money, while Daiwa Securities Group said it was caught up in the alleged scam.

But the latter three put their losses at most at several hundred million yen - relatively small sums compared to those already announced by some major banks.

After Santander, the other big losers included Britain's HSBC and the Dutch Bank Fortis. Both said they had exposure of about US$1 billion.

A string of other European banks have announced investments in the tens and sometimes hundreds of millions of dollars with Madoff.

The Securities Investor Protection Corporation (SIPC), which provides a Congress-authorised special reserve fund to help investors at failed brokerage firms, said Monday it was liquidating the Madoff company.

Madoff's greatest asset appears to have been his insider credentials.

He was a prominent member of the securities industry throughout a career stretching back to 1960, serving as vice chairman of the National Association of Securities Dealers (NASD) and sitting on the board of governors.

He was also a member of NASDAQ Stock Market's board of governors, its executive committee and served as chairman of its trading committee, according to an SEC statement.