• An OpEd For Boston Review: What Sarbanes-Oxley Teaches Us About Dodd-Frank

    By • Aug 22nd, 2011 • Category: Food for Thought, Pure Content

    I’m very proud to have been asked to write an OpEd for Boston Review. The subject is the future of financial system regulatory reform under Dodd-Frank based on our experience with Sarbanes-Oxley.

    President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) on July 21, 2010, almost two years after the failure of Lehman Brothers precipitated a worldwide financial crisis. The law was intended to address the “over-reliance on short-term financing, opaque markets and excessive-risk taking” that had “fanned a panic that nearly collapsed the global financial system,”according to University of Michigan Law Professor Michael Barr.

    Boston Review is a magazine of ideas, independent and nonprofit. They cover politics, poetry, film, fiction, book reviews, and criticism. If you know me at all, you know that Paris Review, Poetry magazine, and Glimmer Train are on my coffee table.

    I’m a sucker for deep thoughts in print.

    The premise of Boston Review is: “democracy depends on public discussion; that sometimes understanding means going deep; that vast inequalities are unjust; that human imagination breaks free from neat political categories; and that powerful images are worth piles of words.”

    Some reject Dodd-Frank because of the perceived failure of Sarbanes-Oxley to prevent the financial crisis. If you claim that Sarbanes-Oxley should have prevented the latest crisis, you’re admitting, in my opinion, that the crisis was caused by accounting manipulation and fraud. The word “fraud” wasn’t heard in relation to this crisis until the publication of the Lehman Bankruptcy Examiner Report in March of 2010.

    In fact, almost three years after Lehman’s failure,  economist James Galbraith complains that he still can’t get anyone to say the word “fraud”:

    What you cannot get – not at a meeting at the IMF, not from the participants at INET – is any serious discussion of contract, law and fraud. I know, because I’ve tried. No one will deny the role of fraud in the financial debacle – how could they? But they won’t discuss it either.

    Why not? Personal complicity plays a role, among present and former government officials, regulators, consultants and the academic ideologues who advised them and those either played the markets or took fees from those who did. There is a vast web of negligence and culpability here…

    I’m branching out a bit. I hope you like it.

    Supported by subscriptions, advertising, individual donations, and foundation grants, Boston Review appears in print six times a year and online at bostonreview.net. They co-publish Boston Review Books with MIT Press.

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    4 Responses »

    1. Two things:

      1. The Federal Reserve is charged by Dodd-Franks with disciplining bad bank practices. Bit the FEd is owned by the llarge banks. This patent conflict of interest will mean that the banks will win and the public lose.

      2. Sarbanes-Oxley promised big fines and jail time for executives who sig3ed false
      financial statements.

      But so far there have been no prosecutions.

      How about Fannie Mae, Freddie Mae, AIG, Lehman Brothers, Bear Stearns,
      Countrywide, Merrill Lynch, etc.?

      Attorney General Holder needs to start prosecuting ASAP.

      Carl Olson
      P.O. Box 6102
      Woodland hills, CA 91365
      818-223-8080

    2. […] you see my OpEd in Boston Review on Dodd-Frank and the lessons we can learn about regulatory enforcement from […]

    3. Carl- Your first point is incorrect. The Fed is not owned by large banks, or any banks for that matter. Banks have “stock” in the Fed primarily to receive dividends, utilize the Fed’s services and to use the Fed discount window for borrowing purposes. The “stock” is not ownership. The Fed reserve bank’s are quasi-private and other than to fund Fed operating costs, all the money the Fed earns goes to Treasury. Hope that helps.

    4. […] sessions, courtesy of my media pass under Forbes.com. I’m also plan to attend everything on Dodd-Frank and the futures and options industry I can stay awake […]

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