Thursday, December 10, 2009

Fixing One Wall Street Scandal, Forgetting the Last

In 2001, the sudden collapse of corporate giants like Enron and WorldCom wiped out the retirement funds of millions of Americans and badly damaged investor confidence in our capital markets. As it became clear that these companies had "cooked the books" - willfully misleading shareholders about their true value - leaders in Congress began crafting what eventually became known as the Sarbanes-Oxley Act.

After months of hearings and bipartisan compromise, Sarbanes-Oxley passed the House of Representatives by a margin of 423 to 3 and the Senate by a unanimous vote of 99 to 0. Signing the bill into law on July 30th 2002, President Bush said "Corporate corruption has struck at investor confidence, offending the conscience of our nation. Yet, in the aftermath of September the 11th, we refused to allow fear to undermine our economy, and we will not allow fraud to undermine it, either." He called the new law "the most far-reaching reforms of American business practices since the time of Franklin Delano Roosevelt."

Today, some in Congress want to roll back Sarbanes-Oxley. They are seeking to exempt certain firms from the transparency standards created by that law. Apparently, less than ten years later, some have already forgotten what we learned from the Enron and WorldCom debacle. huffingtonpost.

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