More Welfare for the Rich

[Undertoad]

Not correct. Sarbanes-Oxley created standards for the auditors. It did nothing to eliminate Enron style accounting in public companies.

Not correct. The auditors sign off on the accounting; that's how it works. SOX had many provisions which would have prevented Enron's particular style of accounting; and we can't compare AIG, because the Times story only alleges a problem, and doesn't describe it at all.

If PWC has concerns over the books, that is a very big deal, and that would be SOX in operation, preventing a problem from being hidden.

the current American administration did virtually nothing to require fiscal responsibility

SOX is absolutely, positively the current American administration doing something enormous to require fiscal responsibility. In fact it is felt in the accounting community that Europe has easier standards and that companies can save money by HQing there. Can people still create economic bubbles? Yeah, as always. I doubt one can come up with any set of rules that would prevent it and still look like the economic system that has made this the richest nation on the planet.

[tw]

Originally Posted by Undertoad

Not correct. The auditors sign off on the accounting; that's how it works. SOX had many provisions which would have prevented Enron's particular style of accounting; and we can't compare AIG, because the Times story only alleges a problem, and doesn't describe it at all.

PriceWaterhouse had concerns as did the internal auditor. But they cannot flag losses that do not appear on the spread sheets. That was Enron accounting. That is what AIG was doing. AIG was also rating equities that did not have that value. PriceWaterhouse would not know. Those losses and massive risks that do not appear on a spread sheet cannot be detected by the auditor. Therefore PriceWaterhouse - fully conforming to Sarbanes-Oxley - could only have concerns. And nothing in Sarbanes-Oxley says those concerns need be publically reported.

PriceWaterhouse had concerns. AIG said it was fiscally stable. Markets only heard what was required by Sarbanes-Oxley. Therefore the public never knew AIG has maybe $1trillion of obligations with maybe $67billion in equity. The public knew exactly what PriceWaterhouse was required to report per Sarbanes-Oxley.

If Sarbanes-Oxley fixes accounting, then why did 3 major investment banks and a long list of other smaller banks and public companies go belly up or go running to the government for corporate welfare when the accounting said they were solvent and stable? Bottom line as The Economist also bluntly said:

The trouble is that financial innovation did not occur in a vacuum but in response to incentives created by governments. Many of the new-fangled instruments became popular because they got around financial regulations, such as rules on banks' capital adequacy. Banks created off-balance-sheet vehicles because that allowed them to carry less capital. The market for credit-default swaps enabled them to convert risky assets, which demand a lot of capital, into supposedly safe ones, which do not.

Money games in accounting are still situation normal as it was at Enron. Even credit markets frozen simply because nobody could trust the counter-parties accounting. Credit markets did not freeze due to a shortage of cash. Spread sheet myths are so routine that nobody knew who was going belly up next.

We have accounting consistent with right wing extremist principles: myths and lies. After lying, plahing money games, and blaming the unions, what does GM do? Change their operations so they can tap another $10billion of free government money. We protect those who pervert spread sheets rather than demand their removal. Another classic example of the problem is Rick Wagoner. He got the job even though he was running GM North America into the ground ... because he was an expert on spinning spread sheets.