After Sarbanes-Oxley, which was adopted primarily because of the Enron debacle, many foreign entities complained and threated to stop doing business in the United States because of Sarbanes-Oxley requirements. (We have 16 articles in the Sarbanes-Oxley section of this blog.) Banks such as HSBC complained but found it difficult to leave the United States. Now that subprime put a dent in profits and put the hurt on SIV’s one must look at financial statements. If a bank took risks that were never mentioned what do we make of that?
“After Enron, with Sarbanes-Oxley, we tried legislatively to make it clear that there has to be some transparency with regard to off-balance-sheet entities,” Senator Jack Reed of Rhode Island, the chairman of the Senate Securities subcommittee, said this week. “We thought that was already corrected and the rules were clear and we would not be discovering new things every day.”
Reed, a Democrat, has sent letters to the Securities and Exchange Commission, as well as to the Financial Accounting Standards Board, which sets U.S. accounting rules, and the International Accounting Standards Board, which does the same for most of the rest of the world. He is asking detailed questions about what went wrong and how it should be fixed.
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