An article on the "gap" in regulatory coverage between the Federal Reserve and the SEC. It tries to show that the banks regulated by the Fed got off lightly in the Enron mess, but the ones regulated by the SEC suffered more.
I don't buy it. The evidence is weak, and the bias shows. However, the discussion is worth having, and no doubt there are tensions there that we need to understand when dealing with a multi-regulator scenario.
Playing Favorites
Why Alan Greenspan's Fed lets banks off easy on corporate fraud.
Ronald Fink, CFO Magazine April 01, 2004
When the Financial Accounting Standards Board released its exposure draft of new accounting rules for special-purpose entities (SPEs), in late 2002, the nation's financial regulators sent FASB chairman Robert H. Herz decidedly mixed signals.
On the one hand, the Securities and Exchange Commission wanted Herz to make the rules effective as soon as possible. SPEs were the prime vehicle for the fraud that brought Enron down, and were widely used by other companies to take liabilities off their balance sheets, obscure their financial condition, and obtain lower-cost financing than they deserved. Not surprisingly, the SEC was anxious to head off other financial fiascos resulting from such abuse.
At the same time, however, the Federal Reserve Board pressed Herz to slow down. That's because the new rules threatened to complicate the lives of the Fed's most important charges: large, multibusiness bank holding companies that happen to earn sizable fees by arranging deals involving SPEs. Stuck between this regulatory rock and hard place, Herz told the Fed and the SEC to get together and work out a timetable that satisfied both constituencies.
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http://www.cfo.com/printarticle/0,5317,12866|M,00.html?f=options
Posted by iang at April 7, 2004 12:36 PM | TrackBack