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