Free Republic

Give Paulson a $700 billion check without asking any questions, and the former Goldman Sachs boss might have a shot at kick-starting the credit markets using some mysterious, black-box, trading sorcery. Because the money isn't his, though, he has to give us at least a vague outline of what he's up to. Now, even if Congress approves some form of his proposal, it's far less likely to work because we're all in on the deal. The plan goes like this: Treasury will pay financial institutions above-market prices for garbage assets nobody else wants. Then, through the magic of mark-to-Paulson accounting,...

The credit meltdown has spawned a few false villains, and one is "mark-to-market" accounting. Too many observers wrongly thought if we just suspend the accounting rule that requires financial firms to report certain investments at fair market value, then the crisis will go away.What is mark-to-market accounting? The people who write and enforce our national accounting standards mandate that publicly traded financial companies must report some of their assets (things like mortgage-backed securities) and liabilities (like money they've borrowed from other institutions) at marked-to-market values. That is, if you bought a certain security at $100 last year, but you can't...

To a supporter of capitalism and free markets, the current debate over a Treasury Department proposal for a $700 billion fund to purchase illiquid assets, is troubling on many fronts. First, a temporary and targeted change in mark-tomarket accounting rules could help solve the current financial market problems at much lower cost. But this alternative has been dismissed with very little in the way of debate. Second, when the public hears that the government must save the economy from capitalism run amok, it loses faith in our free market system. In other words, the huge Treasury proposal has accelerated the...

The credit meltdown has spawned a few false villains, and one is “mark-to-market” accounting. Too many observers—including Congress’s Republican Study Committee—think that if we just suspend the accounting rule that requires financial firms to report certain investments at fair market value, then the crisis will go away. But accounting isn’t the culprit here.

Sarbanes-Oxley Act DEFINITION - The Sarbanes-Oxley Act of 2002 (often shortened to SOX) is legislation enacted in response to the high-profile Enron and WorldCom financial scandals to protect shareholders and the general public from accounting errors and fraudulent practices in the enterprise. The act is administered by the Securities and Exchange Commission (SEC), which sets deadlines for compliance and publishes rules on requirements. Sarbanes-Oxley is not a set of business practices and does not specify how a business should store records; rather, it defines which records are to be stored and for how long. The legislation not only affects the...

How We Can Clean Up A Lot of the Economic Problems Remember Enron, WorldCom, Adelphia, and other companies had artificially put assets on the books? They'd say something was worth $10M when they bought it, but eventually it decreased in value, and they never updated the value in the books. That was part of the fraud. Under current laws at that time, they were all convicted and put in jail for fraud.Then we got all mad and made all these new laws that are coming out the wazoo called sarbanes oxley. It's a huge, massive law but the idea is...

Did Ken Lay Get to Write Sarbanes-Oxley? The $700 billion that Treasury Secretary Hank Paulson is requesting from Congress to restore liquidity in the financial markets is a breathtaking sum of money. But it is also important to remember Paulson has already committed $200 billion to recapitalize Fannie Mae and Freddie Mac. The size of their bailout should tip Americans off: Fannie and Freddie were the key enablers of the mortgage crisis.Fannie and Freddie’s implicit government stamp of approval on these risky investments fueled Wall Street’s appetite for subprime securities. As of last June, Fannie alone owned or guaranteed more...

Before tumbling into bankruptcy, Lehman Brothers Holdings Inc. proposed hiving off hard-hit commercial-mortgage assets so that the investment bank no longer would have to use battered market prices to value the holdings. American International Group Inc. contended in August that the use of market values was forcing it to recognize greater losses than it would ultimately realize on derivatives insuring complex financial instruments backed by mortgages. Now the demise of both firms is rekindling debate over whether so-called mark-to-market accounting has fanned the flames of the credit crisis. Regulators and Congress face growing pressure to decide if the market's turmoil...

If Sarbanes-Oxley were a stock, we'd recommend selling it short. It's only a law, of course, and can't be sold in the literal sense. But on Friday a panel of judges who ride the District of Columbia Circuit of the United States Court of Appeals put it in what, in Constitutional terms, amounts to play. They decided, by a vote of two to one, to uphold the constitutionality of the law. But a devastating dissent by Judge Brett Kavanaugh all but begs for Supreme Court review. The issue is whether Sarbanes-Oxley's creation of an agency to police auditors of public...

With John McCain’s victory in the Republican Primary in Florida, a lot of attention has come his way. The reaction of the pundits and the blogosphere has been all over the map. Some, such as Michael Medved, are enthusiastic about the candidate and his chances in the general election; others, such as Rush Limbaugh, are concerned that a McCain candidacy will spell the end of the Republican party as we know it. And with the cheering for and against him, so to have his past actions and policies come under scrutiny. Everything, from the Keating Five, to the Gang of...

Once this panic is over and all the corporate and financial corpses have been found and buried, politicians and an angry public will demand legislative action. Let's hope the reaction will be more constructive than that in the aftermath of the Enron and WorldCom scandals during the earlier part of this decade: the baleful Sarbanes-Oxley Act. Sarbox has created a lot of unnecessary paperwork for companies (and lucrative make-work for accountants and lawyers). It is a waste of brainpower. The act assumes that paper barriers will stop business wrongdoing. The spectacular bankruptcy of commodities broker Refco in 2005 showed how...

The Office of Labor Management Standards, the federal government’s union watchdog agency, has recouped more than $100 million for American workers since 2001. But the increased oversight on unions hasn’t gone over well with liberals in Congress, who are trying to slash the agency’s budget for next year. Last month, pro-labor Democrats in the House successfully fought back a Republican-led challenge to restore $2 million to the agency’s budget. The Senate will take up the bill when Congress returns from its August recess. The liberals’ revolt against the Department of Labor agency comes on the heels of an increased crackdown...

In the late 1990s, Enron Corporation was seen as a leading progressive among business corporations and a refreshing antidote to the depredations of Big Oil™. In 1997, President Bill Clinton had Enron CEO Ken Lay over to the White House to discuss whether or not he should sign the Kyoto Agreement. But even as early as the late 1990s, Enron had only Enron’s interests in mind, and internal corporate documents described the Kyoto Treaty as follows. "precisely what [Enron has] been lobbying for": "This agreement will be good for Enron stock!!" Enron fooled and lied to far more people than...

The new Democratic Congress has finally found a government agency whose budget It wants to cut: an obscure Labor Department office that monitors the compliance of unions with federal law. In the past six years, the Office of Labor Management Standards, or OLMS, has helped secure the convictions of 775 corrupt union officials and court-ordered restitution to union members of over $70 million in dues. The House is set to vote Thursday on a proposal to chop 20% from the OLMS budget. Every other Labor Department enforcement agency is due for a budget increase, and overall the Congress has added...

EE Times: Semi News SAN FRANCISCO — Sipex Corp. (Milpitas, Calif.), an analog company so staggered by a U.S. Securities and Exchange Commission (SEC) investigation and shifting market dynamics that it nearly went out of business, was relisted Wednesday (April 11) on the Nasdaq exchange after a two-year turnaround. The maker of power and interface devices returned to the high-tech exchange, trading at $8.60, after being delisted nearly two years ago amid an investigation into financial irregularities. Last fall, former Sipex CEO Walid Maghribi agreed to pay a $45,000 fine to settle SEC charges. The SEC alleged that Maghribi allowed...

The strict regimen that Congress imposed on corporate boardrooms and securities in the wake of the Enron scandal in 2002 is prompting companies to avoid U.S. markets by going private and offering their stocks on overseas exchanges, recent studies show. The move away from U.S. markets was seen dramatically last year as initial public offerings on the London Stock Exchange and London's Alternative Investment Market for small companies for the first time surpassed first-time offerings on the New York Stock Exchange and Nasdaq Stock Market.

The gilded world of Wall Street may lose up to 60,000 jobs in just five years unless cumbersome government regulations are dumped and replaced by looser European-style ones, according to a sweeping new study. Mayor Bloomberg and Sen. Chuck Schumer were set today to unveil the bleak report, which warns that the city could lose as much as $25 billion in cash flows that Wall Street now generate unless their blueprint for revising securities regulations is heeded. Among the changes proposed: Setting up a new congressional panel to oversee financial services; cutting Homeland Security red tape to make it easier...

The number of U.S. securities fraud class-action lawsuits dropped last year, a study released Tuesday found, even as investors pursued a new avenue of litigation involving the timing of stock options grants at big companies. Federal securities fraud class actions plunged 38 percent to 110 last year based on filings through Dec. 11, compared with 178 lawsuits in 2005 and as many as 267 in 2002, according to a study by Stanford Law School and Cornerstone Research, a research firm for litigators. Filings are at the lowest level since Congress passed a major class-action reform law in 1995, the study...

Why do young private companies want to sell out now instead of becoming public corporations? After all, the potential long-term gains for a founder for owning a chunk of stock in a large corporation are far greater than those from a quick sale. To understand this sudden desire to pump and dump, put yourself in the entrepreneurs' shoes. Looking ahead at a possible IPO for your hot little start-up, all you see are minefields of legal precedents and new regulations created after the dot.com boom. Not least -- but worst -- there is the Sarbanes-Oxley Act of 2002, whose self-monitoring...

HONG KONG--If you want to look for reasons why New York's status as the world's financial center is in serious jeopardy, you need only come here to gaze at this booming city and tour its markets. Increasingly, Hong Kong and London are the places where companies are finding it easier and cheaper to list their shares and raise capital. Last year, of the 25 largest initial public offerings in the world, only one took place in America. This year, Hong Kong is likely to end up as the No. 1 market for stock offerings world-wide. Perhaps the top culprit in...

New York Times Co. (NYT) Chairman Arthur Sulzberger Jr. and other members of the family that controls the newspaper publisher held talks with a trusted financial adviser about taking the company private, according to a report on the Web site of BusinessWeek magazine.

In recent months, there has been a lot of media chatter about the possibility of London taking over New York's position as the world's financial capital. Such speculation, although overblown, has focused our attention on a broader and legitimate concern: Unless we improve our corporate climate, we risk allowing New York to lose its pre-eminence in the global financial-services sector. This would be devastating both for our city and nation. One of the engines of growth for the U.S. economy, the financial-services industry in New York has long possessed significant comparative advantages over London and all other cities. These advantages...

LONDON'S Mayor Ken Livingstone re cently visited New York City, trolling for businesses that might relocate jobs and investment activity from the United States to Great Britain. Asked what he considered London's competitive advantage over New York, he replied, "Sarbanes-Oxley." His reference was to the federal law, sponsored by Democratic Sen. Paul Sarbanes and Republican Rep. Michael Oxley, enacted in 2002 for the purpose of restoring investor confidence in publicly traded companies in the wake of the Enron scandal. But Sarbanes-Oxley, or "SarbOx" (as it has come to be known), has turned out to be a remedy that may well...

Three US congressmen are pushing for an amendment to the Sarbanes-Oxley Act (SOX), the law designed to make executives more accountable, in a bid to water down the regulations for medium-sized companies. Gregory Meeks, a Democrat, has joined Republicans Tom Feeney and Pete Sessions to introduce an amendment to the Act that would exempt companies with a market value of less than $700m (£377m) or annual revenue of less than $125m and fewer than 1,500 shareholders from having to comply with the regulations. The unusual cross-party move comes just days after Kenneth Lay and Jeffrey Skilling, the two top executives...

See for example this thread first. With the conviction of Mr. Lay (of Enron fame) just let me say: He made a killing just like Jeffrey Skilling. In this case I think crime did pay!

Last week, I posted a note from a reader who urged that businesses not be allowed to deduct wages of workers who cannot prove their legal status in the United States. I didn't post the reader's name at the time, but he has since given me permission to give credit where credit is due: His name is David Barulich, and he is a financial professional in Pasedana, California. Meanwhile, another reader - who prefers anonymity - offers this addition to Mr. Barulich's concept: "Your reader's suggestion to modify the Internal Revenue Code, so that employers could only expense employee wages...

Blaming every other company in the U.S. for the Enron and WorldCom scandals has been a bonanza for accountants and a killer for small companies especially. Congress need to correct a very bad law. To address reform of the Sarbanes-Oxley Act of 2002 (Sarb-Ox), recall that it was passed in the political furor following the Enron and WorldCom scandals to try to prevent future accounting frauds. Let's start with its most obvious, largely unintended, consequences. Sarb-Ox, with its notorious Section 404 requiring internal control certifications in particular, has created a tremendously expensive amount of paperwork and bureaucracy. In the Sarb-Ox...

...According to Attorneys Wasabi Systems Releases a New Study Analyzing Sarbanes-Oxley Risks Associated with Linux NORFOLK, Va.--Jan. 18, 2006--Many companies using Linux for embedded applications may be unwittingly violating the Linux license and even breaking federal securities laws, according to a white paper released today by Wasabi Systems, a leading embedded operating systems provider. The white paper, When GPL Violations are Sarbanes-Oxley Violations, is the first in a series of legal studies analyzing the common misperceptions and risks associated with Linux and its license, the GNU General Public License (GPL). Future white papers will look at the GPL implications of...

Imagine opening tomorrow's newspaper and reading this: "Citing all-too-frequent child abuse and neglect, Congress has proposed the Parenting Reform Act. Under the proposed law, all parents must sign a sworn statement pledging that they have not 'caused unreasonable physical harm or danger' to their children. To verify compliance, parents will be required to submit their children to a monthly full-body inspection by the new Parental Oversight Board, and account for every cut and bruise that inspectors find. If a parent cannot prove the 'reasonableness' of any injuries to the Board's satisfaction, it could result in a loss of custody and...

KPMG avoided the fate of Arthur Andersen yesterday... over the marketing and sale of "abusive" tax shelters. But the price of survival was high. The accounting firm will pay $456 million in fines and restitution and has agreed to let a federal monitor look over its shoulder. At the same time, no fewer than eight former KPMG executives and an outside lawyer were indicted on conspiracy charges for designing and selling the shelters.... KPMG will survive this "deferred prosecution" by admitting wrongdoing. But it's easy to forget amid the righteous indignation over tax shelters with names like FLIP, BLIP, OPIS...

The latest jobs report shows that the real economy is strong and growing impressively. But there are continuing weaknesses in the financial sector that are worrisome and could drag the real economy down unless addressed. One area of concern is the stock market. Since the beginning of last year, the Dow Jones Industrial Average has basically been flat. It moves up and down within a narrow range and has never been able to sustain an upward trend. Shockingly, the Dow is no higher today than it was six years ago and is still below its 2000 peak. Given the state...

The Supreme Court has now ruled that it was excessive prosecutorial zeal and inadequate jury instruction that destroyed Arthur Andersen in 2002, not the merits of the federal obstruction-of-justice case.... Thus, the excesses of a few corporate swingers led to suspicions that hanky-panky was the ruling ethos in every corporate boardroom. Naderites, Hollywood pundits, Marxist professors and left-wing journals piled on with assurances that they had been right about capitalists all along. [A] Congress never reluctant to make work for fellow lawyers whooped through the Sarbanes-Oxley bill.... The sour public mood has had other effects. Staffers at the Securities and...

As a unanimous Supreme Court... announced its reversal of the 2002 criminal conviction of Arthur Andersen for shredding Enron-related documents, our first thought was: ..."Which office do I go to to get my reputation back?" Except that in this case, even if the proverbial office existed, there is no one left at Andersen to knock on the front door and demand restitution. The accounting giant, which once employed 28,000 people in the U.S. and 85,000 world-wide, is essentially no more. There's still an office in Chicago, but the fewer than 200 people who work there handle leftover legal and administrative...

  There Ought To Be A Law!May 5, 2005 With the Beltway- Boobs in a frolic making new laws and regulations that handcuff the average citizen to governmental power (abuse?)...it seems that the fox is guarding the henhouse.  In a recent study, The Top 10 Examples of Government Waste, the Heritage Foundation’s Brian M. Riedl barely scratched the surface of the “riskiest scheme” ever foisted upon the American public...trusting the U.S. government with your money! In a recent “press release” discrediting the President’s Social Security reform effort, Tweedle-Dum-Pelosi and Tweedle-Dee-Reid accuse Mr. Bush of creating a “risky scheme” that “place(s) retirees at...

  What About the Gander?April 28, 2005 Aesop correctly noted that, “We hang the petty thieves and appoint the great ones to public office.”  Nowhere is this truer than in Washington, D.C. where the elite govern by one set of rules for “you and me” and another set of rules for themselves.   It’s hysterical how the Sarbanes-Oxley Act of 2002 threatens the CEO of General Motors with jail if some putz in a Peoria warehouse cooks-the-books, but the Bipartisan Campaign Reform Act of 2002 (McCain-Feingold) allows your elected officials to practice Enron-era accounting and whistle Dixie on the way to the...

Ask nearly any business executive to name the biggest menace facing corporate America, and the answer is apt to be a number: ''404.'' That refers to Section 404 of the Sarbanes-Oxley Act, which requires massive reporting by publicly held companies to prevent recurrences of WorldCom, Enron, Tyco and other scandals. For honest corporate officers, this is classic governmental over-regulation -- a dagger aimed at the heart of the U.S. economy. This is a peculiar state of affairs to be brought about by a government under Republican control. William H. Donaldson, the Bush-picked SEC chairman, sides with his commission's Democratic members...

Corporate boards are shedding their sleepy images and becoming more ruthless when something is not quite right at the top. The result: Top U.S. executives are being knocked off their pedestals faster than ever. Boards are asking high-level company officers to hit the road for anything ranging from a financial scandal, lackluster results, improper insider trades or even an affair with another executive. In February, U.S. companies announced 103 CEO changes compared with 92 in January, according to Challenger, Gray & Christmas, an outplacement and employment research firm. It was the fourth consecutive increase in monthly turnover and the first...

Sensing public outrage over business corruption in America is waning, some in the corporate community are seizing on the shift in mood to try to roll back reforms, say top U.S. officials and academics. "There's clearly a rearguard action going on," said Maryland Democratic Sen. Paul Sarbanes in an interview three years after the Enron debacle that led to his co-authoring of landmark corporate governance and accounting reforms in 2002. Business scandals are now daily fare for Americans, from the prison sentencing on Friday of a former top Boeing Co. executive to revelations of abusive trading in the mutual fund...

The directors of Fannie Mae, the big mortgage finance company, will meet Sunday to consider the fate of two senior executives who signed off on financial statements that violated accounting rules, people close to the company said Friday. The two executives, Franklin D. Raines, the chairman and chief executive, and J. Timothy Howard, the chief financial officer, certified financial statements that the Securities and Exchange Commission on Wednesday ordered to be restated because of significant violations in accounting rules over their treatment of derivatives and prepaid loans. Fannie Mae said in November that a restatement would force it to recognize...

WASHINGTON, Dec. 16 - Fannie Mae, the housing-finance giant, for years has fended off critics who contend that the company is too big, too powerful and too risky. But the Securities and Exchange Commission's Wednesday ruling, that Fannie Mae had seriously breached accounting rules, could touch off a chain reaction that results in stricter government controls, legislation limiting its growth and possibly even a change in top management. Democratic and Republican lawmakers alike demanded on Thursday that senior executives, including the chief executive, Franklin D. Raines, return tens of millions of dollars in bonuses and other compensation that they had...

Dec 13, 2004 (financialwire.net via COMTEX) -- (FinancialWire) Dell (DELL) CEO Kevin B. Rollins, Home Depot (HD) CEO Robert Nardelli, Time Warner (TWX) CEO Richard Parsons and hundreds of business executives have been summoned to a two-day confab with President Bush, Vice President Cheney and the returning Secretary of the Treasury John Snow, himself a former CEO, at CSX Corp. (CSX). The president wants to focus on capping lawsuit damages, Social Security reform and simplification of the tax code. --snip-- The confab, however, does not appear to include representatives of small public corporations where the unproportional costs of Sarbanes-Oxley are...

...In an era of general acceptance of deregulation and privatization, Mr. Spitzer has introduced the world to yet a new form of regulation, the use of the criminal law as an in terrorem weapon to force acceptance of industry-wide regulations. These rules are not vetted through normal authoritative channels, are not reviewable by any administrative process, and are not subject to even the minimal due-process requirements our courts require for normal administrative rule making. The whole process bears no resemblance to a rule of law; it is a reign of force. And to make matters worse, the regulatory remedies are...

Liberal activist Norman Lear told me last week that if George W. Bush wins re-election, "watch what happens to real estate in New Zealand." He wasn't joking. Mr. Lear may have an exaggerated notion of the number of Americans with means to relocate to the other side of the globe. But he accurately reflects the intense feelings of a few who do: himself, financier George Soros, insurance executive Peter Lewis and Hollywood mogul Stephen Bing. Together, they have spent more than $50 million to register new voters and defeat President Bush. They are the X factor in this year's election:...

...Even Democratic economists, such as Laura Tyson and Robert Rubin, agree that faced with recession some fiscal stimulus, perhaps including tax cuts, was necessary... they acknowledge the need to run a budget deficit as a countercyclical measure. But their preferred tax cut is the temporary "rebate," putting money into the hands of consumers in the hope of stimulating demand....they favor increased government spending for the same purpose. ...But phased-in cuts are an incentive to defer income, and after 9/11 ...this was not sufficient, and that the U.S. economy risked sinking into a deeper slump. ...Mr. Bush... doubled down on his...

White-collar crooks deserve tough treatment. But 24 years for Dynegy's Jamie Olis? Politics has turned financial fraud into a worse crime than running drugs or killing someone. Former Tyco chief executive Dennis Kozlowski is a lucky guy. Not because a stubborn juror landed him a mistrial. He's lucky because even if New York prosecutors retry him, as they've vowed to do, the flamboyant former exec is looking at 15 to 30 years, no more. Were Kozlowski in federal court instead, he could easily be facing what amounts to a life sentence--with no chance of parole--under rigid new sentencing guidelines. While...

In the first weeks of 2004, just when nearly all figures indicated the economy finally was moving full-speed ahead, the government released a job-growth report that many took as disappointing. Just 1,000 new jobs had been netted in the month of December, according to the Department of Labor's survey of nonfarm payrolls. The news wasn't all bad. The mass layoffs had all but stopped, and employment appeared to have stabilized, with the unemployment rate at 5.7 percent being the lowest level in 14 months. In a recovery, employment is considered by most economists to be a "lagging indicator," and new-jobs...

Anyone aware of a move to roll back or repeal the onerous Sarbanes-Oxley reporting requirements? Can anyone point to estimates of the cost to US business of these requirements? I searched FR, and found precious little discussion of Sarbanes-Oxley, though I suspect many Freepers are suffering it's effects. I suspect the complaints about this bill will escalate to a roar after the first round of mandatory reporting is completed.