Useless, utterly useless

[Salem]

http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act

I mean, wasn't that supposed to stop all the financial nonsense in the US?
Don't be stupid, it's the wrong tool for the wrong job. Rushed through in some half-assed attempt to show the media they were doing something.
The few $Bn which the likes of Enron etc were caught for are mere pocket-change compared to the amounts now being thrown about.

"The Architect: The first matrix I designed was quite naturally perfect. It was a work of art. Flawless. Sublime. A triumph only equaled by its monumental failure. "
Yup, SOX is a monument all right.

FFS, first the global meltdown of lend-happy banks causing a cascade through the entire system.

Then Bernard 'Made-off' with all my money creeps out of the woodwork with another $50BN in another britney-esque "oops, I did it again" moment.

No doubt, too busy measuring the height of the waves at the shore to bother looking up to see the big f.....g tsunami heading for them.

[Dave Sinkula]

How did a dozen billionaires get ripped off in the biggest heist ever? They thought they were cheating average investors

[jbennet]

yeah quite a few european banks and charities have been caught out

[GrimJack]

The US Sarbanes-Oxley Act of 2002 (SOX) mandates what is effectively a systems engineering solution to the problem of how to control theft from the inside. Reliability is achieved not by human oversight alone, but by a set of information and control systems that ensures information quality and management accountability. Executive officers are required to sign the accounts and are criminally liable for any inaccuracy. The act also mandates near-real-time disclosure of any material events.

In the past, reliability was equated with the moral character of the directors and auditors. Nowadays, reliability must be seen as an engineering problem.

Cursing SOX for not being perfect or not catching crimes that the stupid SEC had been warned about for years is pointless - just like my pointing out how well the Libertarian philosophy is supported by the current meltdown. I am sure that deregulation would have done a much better job of stopping the embezzlement.

[Dave Sinkula]

Madoff and the Failure of the SEC

[GrimJack]

This is a perfect case study showing that the SEC is incapable of protecting investors as well as free-market institutions can. The SEC is becoming increasingly irrelevant and people are beginning to take notice. It failed to save investors from the house of cards made up of mortgage-backed securities, credit default swaps, and collateralized debt obligations that resulted from the housing bubble. Now it has failed to protect thousands more individuals and charities from something as simple and old as a Ponzi scheme!

Er, where does it show us that the free market can protect us? Bushie free-marketeers running the SEC were what screwed us. Gutting the SEC, then blaming the SEC for not catching the problem does not show the success of the free market system nor does saying that the free market saw it - neither stopped it from happening.

[Dave Sinkula]

Er, where does it show us that the free market can protect us?

In the paragraph immediately above the one you quoted.

Various snippings... Legislate in Haste, Repent at Leisure
As a result of Sarbanes-Oxley, new SEC regulations, and changes to exchange listing requirements, public middle-market companies expect compliance costs to increase by almost 100 percent. Is Deregulation to Blame?
The new Washington consensus says "yes." The facts on the ground say something different. Misunderstanding Deregulation
Henry Manne sent along this email, which I thought worth passing along:
Tyler Cowen recommended a blogger who said:
“Back in April 2004 the SEC voted to loosen the capital rules for the five biggest Wall Street investment banks. In retrospect, this was a very bad idea indeed, and it was a bad idea for precisely the reasons that have caused our financial problems to become so dire: it allowed leverage to skyrocket unsustainably and lending standards to deteriorate.”
I take it that this is the crux of the argument that deregulation is at the heart of the current meltdown. But isn’t there something peculiar about this “deregulation?” Isn’t it really a case of a price-fixing regulator who made a big error, as they are prone to do. The leverage still skyrocketed because all that crappy paper forced or encouraged into the market by the FMs and bank regulators was out there and looking government insured. To call this a problem of deregulation is, I think, quite a stretch. If we call every industry-serving change in regulation “deregulation,” it seems to me that we have taken all the meaning out of the term. I suspect that the enemies of deregulation are just trying to hitch a cheap ride.Complete agreement here.

[Salem]

In more bone-headed moves, I see that the proposal for "saving" the US car industry is for merging 3 into 2.

The problem with lumbering dinosaurs is that they're neither reactive, nor competitive. All a merger will achieve is that they'll fail more slowly on the next guy's watch.

All 3 of them should be broken up into a dozen parts, and each made to fend for themselves. Sure some will die, but the others will emerge stronger for it. Plus you'll actually have an industry that will be capable of delivering what the market actually wants, not some marketroids "lowest common denominator".
Either that, or get used to watching fossilisation in slow motion.

If 1 bank fails out of a pool of 100, then the market as a whole isn't going to be overly worried. Consumer protection schemes can kick in and are generally able to cope.

Now take 5 monoliths, all busy swapping debt with one another so nobody knows what the hell is happening. One falls, and the other 4 are in deep shit.

If the internet has taught us anything (which apparently it hasn't), is that highly distributed and autononmous systems are very resilient to all sorts of crap which might come their way. Sure there's plenty of scope for local problems, but the system as a whole endures.

If something gets to the point where it's "too big to fail", then it's too big by definition.

[Ancient Dragon]

From what I read this morning Ford doesn't want or need any bailout money at this time. It is either going to fix its own problems by itself, or wait until next month when Obama will be in charge.

And Bush is going to nationalize the two remaining auto companies -- Crysler and GM -- by buying shares of stock for 17.5 Billion or so. That puts the government in charge of building cars -- a very very bad idea.

[GrimJack]

In the paragraph immediately above the one you quoted.

I read that part, all it said is that if you did not pay us, your screwed. The point of SOX was to protect the public - it was gutted by Bushies; it did not do the due diligence it was mandated to do.
The Madoff children knew that it was a scam and did not allow their dad to touch any of THEIR money for years but did not say anything until it looked like the scam was going to be uncovered.

The free market says 'screw you' unless you pay me. Why did those 'due diligence' firms not notify the public? The free market paid Moodies and S&P to honestly rate the credit-worthiness and they lied and cheated and brought about the current crash. How does the Free Market handle that?

SOX was set up to try and protect the public from the Free Market.

[GrimJack]

I read that part, all it said is that if you did not pay us, your screwed. The point of SOX was to protect the public - it was gutted by Bushies; it did not do the due diligence it was mandated to do. The Madoff children knew that it was a scam and did not allow their dad to touch any of THEIR money for years but did not say anything until it looked like the scam was going to be uncovered.

The free market says 'screw you' unless you pay me. Why did those 'due diligence' firms not notify the public? The free market paid Moodies and S&P to honestly rate the credit-worthiness and they lied and cheated and brought about the current crash. How does the Free Market handle that?

SOX was set up to try and protect the public from the Free Market.

Let's have a little more from the Free Market:
The Madoff family has long standing ties to SIFMA, which represents many of the country’s biggest brokerage houses, banks and financial services companies. Bernard Madoff sat of the board of directors of the Securities Industry Association, an advocacy group that merged with the Bond Market Association in 2006 to form SIFMA. His brother, Peter Madoff, the senior managing director of the firm, served two terms as a member of SIFMA’s board of directors.

Politico reported Tuesday that Shana Madoff Swanson, who’s the niece of Bernard Madoff and a compliance attorney at his firm, is married to former SEC investigator Eric Swanson. Swanson left the SEC in 2006, and the two were married in 2007. Swanson was the assistant director in the SEC’s Office of Compliance Inspections and Examinations’ market oversight unit in Washington. According to his biography, Swanson “supervised and conducted inspections and examinations that involved a wide range of issues including best execution, order handling, insider trading [and] market manipulation.”

The lobbying firm Dow Lohnes Government Strategies filed paperwork on Dec. 12, terminating its lobbying contract with Bernard L. Madoff Investment Securities. That ended more than 10 years of Madoff lobbying in Washington, in which his investment firm spent more than $400,000 to influence the federal government. Bernard Madoff sat of the board of directors of the Securities Industry Association, an advocacy group that merged with the Bond Market Association in 2006 to form SIFMA. The two Madoff brothers have given $56,000 to the lobbying organization over the past nine years.

[Dave Sinkula]

The free market says 'screw you' unless you pay me.

And an almighty gov't is different? Puh-lease.

[hughv]

http://news.yahoo.com/s/ap/20081217/ap_on_bi_ge/madoff_scandal

"Credible and specific allegations regarding Madoff's financial wrongdoing going back to at least 1999 were repeatedly brought to the attention of SEC staff, said Cox. Cox said he was gravely concerned by the apparent multiple failures over at least a decade to thoroughly investigate the allegations or at any point to seek formal authority from the politically appointed commission to pursue them."

"Gravely concerned?"
"Cox's critics said that targeting the staff was Cox's attempt to salvage his own reputation.

"He put in place the people he is now shifting the blame to," said Ross Albert, a former SEC senior special counsel, former federal prosecutor and now a private attorney in Atlanta.

Senate Majority Leader Harry Reid, D-Nev., suggested Cox bears some of the responsibility for what went wrong.

"I served in Congress with Christopher Cox, but I don't think he's going to make the All-Star team," said Reid."

This is just the usual Fox/Henhouse syndrome, which is going to continue until some of these thieves start going to jail.
"The rich are different." That is, they buy the legislators who give them the laws and free passes they want. Nothing's going to change until true campaign finance reform makes it impossible to buy congress' votes. Don't look for that any time soon.

[hughv]

And then, I found this:
SEC Report: Employees Browsed Porn, Ran Private Businesses

http://www.propublica.org/article/sec-report-employees-browsed-porn-ran-private-businesses-1219#When:17:01:11Z

"[Investigators] uncovered evidence that an employee who was still in his probationary period had used his SEC laptop computer to attempt to access Internet websites classified as containing pornography, resulting in hundreds of access denials. The OIG investigation also disclosed that this employee successfully bypassed the Commission’s Internet filter by using a flash drive."

I worked for the Feds back in the 70s and observed similar behavior first-hand.

[Dave Sinkula]

If only Madoff's scheme were gov't run...
:icon_razz:

[Dave Sinkula]

Washington Is Killing Silicon Valley
[...]

From the beginning of this decade, the process of new company creation has been under assault by legislators and regulators. [...]

The new laws and regulations have neither prevented frauds nor instituted fairness. But they have managed to kill the creation of new public companies in the U.S., cripple the venture capital business, and damage entrepreneurship. [...]

[...]

For all of this, we can first thank Sarbanes-Oxley. Cooked up in the wake of accounting scandals earlier this decade, it has essentially killed the creation of new public companies in America, hamstrung the NYSE and Nasdaq (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.

Meanwhile, FASB has fiddled with the accounting rules so much that, as one of America's most dynamic business executives, T.J. Rodgers of Cypress Semiconductor, recently blogged: "My financial statements are a mystery, even to me." [...]

But FASB's biggest crime against the economy and the American people came when it decided to measure the impossible: options expensing. [...]

Not to be outdone, the SEC has, through the minefield of "full disclosure" requirements and other regulations, made sure that corporate directors would never again have financial privacy and would be personally culpable for malfeasance anywhere in the company. This has led to a mass exodus of talented people from boards of directors in places like Silicon Valley. Full disclosure was supposed to make boards more responsible. Instead, it has made them less competent.

[...]

[...] If Mr. Obama is serious about getting the country out of this recession using something more than public make-work projects, he should restore the integrity of the new company creation cycle: rewrite full disclosure, throw out options expensing, make compliance with Sarbanes-Oxley rules voluntary, and if he won't cut it, then at least leave the capital gains tax rate alone.

Otherwise, Mr. Obama might end up being remembered as the second Herbert Hoover, not the next FDR.

[GrimJack]

Washington Is Killing Silicon Valley

Murdock owns WSJ and FOX Snews - why anyone would quote those sources as having any kind of validity is way beyond me. It's like quoting Ace on Obama.

Neither are rational.
Neither are objective.

[Dave Sinkula]

Murdock owns WSJ and FOX Snews - why anyone would quote those sources as having any kind of validity is way beyond me. It's like quoting Ace on Obama.

Neither are rational. Neither are objective.

Do you ever apply this same scrutiny to your own sources? [/rhetorical]

[GrimJack]

Do you ever apply this same scrutiny to your own sources? [/rhetorical]

Yes, I do. I actually look around for more than one opinion, I think about what I say, and I generally post links. I choose links that explain and often do not fully support what I think. Sometimes, I choose links that I know will wind you up - we have fun here.

[Dave Sinkula]

Then you do understand that such is the same thing you appear to be complaining about.