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.
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I’m a sucker for deep thoughts in print.
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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.
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