James A. Donald: > > The present economic chaos is in part a result of > > Sarbanes-Oxley, which made it legal, and indeed > > arguably mandatory, for various financial firms to > > misrepresent the value of their mortgages in a > > fashion very similar to the way that Enron > > misrepresented the value of their gas contracts. To > > make accounts correctly represent reality is a hard > > problem, a problem in which legislators lack > > background and skills. When legislators proceeded > > to tell businessmen how to do their accounts, the > > result was complete disaster.
Allen wrote: > So, if I understand you correctly, without legislative > or other, similar regulatory mechanisms in place we > get Enrons and once they are in place we get Enrons. > Huh? Enron was the product of a regulatory environment - an earlier failure of regulation of accounts, an earlier manifestation of the failure regulation and politics to manage accounting. The problems with accounting procedures that led to Enron were gravely worsened by Sarbannes Oxley, as was manifested by the demand for non SOX accounting information from Bear Steins Bank that is arguably illegal to provide. > I am not convinced that financial firms know what they > are doing with or without government interference. I > will grant that often as not governmental solutions > are not well thought out or properly enforced. However > given that I have seen financial institutions allow, > even encourage, gross insecurities in their > infrastructure to save a penny now and devil take the > hindmost when their stupidity catches up with them as > we see in the current mortgage situation and Bear > Sterns, it seems we need something to prevent more > structures like snake oil cryptography. If politicians cannot do accounting, how much less can they do cryptography? No matter how misleading were the accounts of Bear Steins, they were a lot better than the way government does its own accounts. Perhaps now that the leading executives of Bear Stein's are facing unemployment, they could take charge of the GAO. _______________________________________________ FDE mailing list [email protected] http://www.xml-dev.com/mailman/listinfo/fde
