So Now He Tells Us: Alan Greenspan Doesn't Like Sarbanes-Oxley

from the thanks-for-nothing dept

Thu, Nov 9th 2006 3:11pm — Joseph Weisenthal

Despite the major financial scandals from a few years ago, embodied most famously by the collapse of Enron, there's good reason to think that the resulting Sarbanes-Oxley regulation was a poor response to the problem that ultimately had the effect of making the US a worse place to do business. Apparently, ex-Federal Reserve Chairman Alan Greenspan agrees, calling parts of the bill a "nightmare". He also said some interesting things about the nature of financial reporting, noting that it was something of an art form, which makes it hard to believe that we'll ever have real-time financial reporting. Greenspan added that he's optimistic that certain parts of the law will be changed, noting that some of the incoming Democratic leadership are open to the idea. It's good to hear him speaking up, but we wonder why he waited until he was out of office to let his opinions be known. Perhaps at the time he didn't feel it was his place to talk about it, or maybe it's just a matter of now having some hindight. Unfortunately, it's always easier to get things passed than to get them repealed.

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12 Comments

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Overcast, 9 Nov 2006 @ 4:45pm

Ummm, yeah - people were saying that the same day it was introduced.

How stupid are the people running governments anyway? Is there a cap on SAT scores for them?
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jinx, 9 Nov 2006 @ 4:46pm

one good thing came out of it...
IT instantly created more IT jobs for all of computer and security people.
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Tashi, 9 Nov 2006 @ 5:32pm

Re: one good thing came out of it...
That's true, but the long term costs of making business expensive and unattractive outweigh the short term gain of IT jobs, some of which were probably outsourced anyway.
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misanthropic humanist, 9 Nov 2006 @ 5:38pm

Re: Re: one good thing came out of it...
What is this "long term" thing of which you speak Tashi?

Remember, we are at war. Without rubber stamp legislation the terrorists win.
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Joe Smith, 9 Nov 2006 @ 6:13pm

Fraud
Enron and Worldcom were straight accounting frauds which were clear to any of the professionals who got close to the companies. They were little different from the sorts of frauds that took place during the savings and loan scandal.

Most such frauds have at their root: middle management trapped between what is demanded of them and what they can actually deliver combined with a corporate culture which enables fraud. Corporate frauds usually start small as a temporary fix and then snowball out of control over time as bigger and bigger fixes are needed to keep the lie going.

Maybe what we need is to have auditors complete a standard fraud questionnaire as part of the audit - you know - have you booked revenue that you have not earned - have you refinanced bad or doubtful debts - fully disclose all transactions with persons affiliated with the company - etc.
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William, 9 Nov 2006 @ 6:30pm

It is here to protect us
Without Sarbanes-Oxley(SOX) business could do basically anything on there financials. Accounting has never been fun and it shouldn't be it should be boring and heavily regulated. SOX helps protects everyone who has money in the stock market. And even though nothing can prevent outright fraud it was a step in the right direction.
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getreal, 9 Nov 2006 @ 6:43pm

Joe Smith
Joe, the auditors are part of the problem. Where do you think companies got the bright idea of stock backdating? United Healthcare reported 12 years of wrong financial information. How many investors bought their stock using false information?

SOX came about because senior leadership created layers of management and compliance positions so they would have someone to blame. SOX requires senior leadership to actually be accountable for the books. Now they can no longer get away with saying "I didn't know" The penaltys for improper oversight are just about as harsh as commiting fraud. Thats because senior executives make it very difficult to actually prove things, everyone knows they did it, but they can't prove it. Thats where improper oversight comes in.

SOX's goal is to give the market confidence in buying stocks. If that fails, what is the cost of that? Examples like Enron really strike at the foundation of Wall Street, without confidence, the whole market is at risk.
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Joe Billy Bob, 9 Nov 2006 @ 7:15pm

Re: one good thing came out of it...
#1 IT did not create the jobs. It was congress that passed the law.
#2 With all the outsourcing most of the jobs created were created overseas by the bean counters.
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Tashi, 9 Nov 2006 @ 7:50pm

Re: Re: Re: one good thing came out of it...
Maybe I need Homeland Security's terror alert to keep me in line. :)

Well it is debatable exactly how much SOX costs now and I don't claim to understand it all. I got out of managerial accounting with an A but I crammed like hell for it and pretty much forgot it after I got out of there. But, I think there is more concern for the smaller companies. Compliance is not cheap by a long shot, and has greatly outpaced its benefits over the last few years. Basically, a company has assets to turn into income and liabilities that generate expenses. SOX is the cost of doing business and so far companies are struggling to offset that cost. Independent audits and reviews, consulting, and other levels of redundancy I think it a bit excessive. It is needed? Sadly yes but it desperately needs some reform.
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Anonymous Coward, 9 Nov 2006 @ 7:51pm

Re:
sat scores for politicians??? one word. Bush
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Jon, 10 Nov 2006 @ 10:25am

Bush
Bush was a terrible choice for president--few will deny that.

The problem is that of the people that _could_ be elected, he was the least bad. The same was true of this election--and probably will be true of the presidental election [and all of those below] in 2008.

The only way I could make my hand move to vote for Bush was to look at the alternatives. When we have people who are only bad it will be much easier. But our choice seems to be between "terrible" and "even worse".
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r, 12 Nov 2006 @ 5:53pm

edit... what?!
"Why didn't he comment on this while he was chairman"

If you have EVER followed Greenspan you'll find a few things to be true:
- The slightest facial twitch sent markets in 0.5% moves.
- People reacted to even the most watered down statements from Greenspan.
- Greenspan was extremely careful on what he commented on, how he did it, etc.

That he is more forthcoming now that he is out of office, is not surprising in the least.

I don't know why you guys are making comments like these. It seems to display a lack of understanding, knowledge and analytical activities.

I won't be back.
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