Every so often, I'm overcome by what I like to describe as "Enron nostalgia."
Remember Enron? That was a brief, shining moment, a bit like Camelot, only more annoying, and without Lerner and Loewe. Instead of mythical knights, there were very real CEOs cooking the books, accounting firms going along with it, boards of directors looking the other way and regulators who actually seemed to give a damn.
Even Congress seemed to care (remember Sarbanes-Oxley?), as did prosecutors. People actually went to jail.
Today, in the post-Camelot era, we have everything that I just described and then some. The difference is that regulators don't care, and the same goes for Congress, law enforcement -- you know, everybody we're supposed to count on to enforce the law.
There is, believe it or not, a law against misleading financial statements. Several laws, even if you include the long-forgotten, never-enforced Sarbanes-Oxley. But the Securities and Exchange Commission, et al., got out of the business of policing corporate chicanery while the ink was still wet on the Enron headlines, by the time clownish SEC Chairman Harvey Pitt
. Pitt's message to corporate America was a simple one: "Don't worry, guys, I've got your back." And, with only minor modifications over the years, that pretty much remained the SEC's mission statement.
My most recent attack of Enron nostalgia was brought on by word that
Bank of America
was, oh, perhaps just a bit overoptimistic in its asset disclosures a few years ago. The company said it pushed billions of dollars in debt off its balance sheet between 2007 and 2009, as
did in its Repo 105 scheme (which, in turn, bore a remarkable resemblance to the schemes Enron used to manipulate its books).
Just to show you how casual and ordinary it is for a company to cook the books nowadays, Bank of America clued in the SEC on its hijinks in a genial
with a commission accountant. Apparently, the bank had told the SEC about the repos. But rather than proceed to an enforcement action, the way any self-respecting regulator would behave, the SEC sent Bank of America a letter and the bank wrote back. Thus, we have the bank's "dog-ate-our-homework" explanation in a letter to an agency underling, rather than our reading about all this in a more suitable venue, such as an SEC litigation release.
What I find fascinating, reading through this letter, is the utter lameness of the whole thing. What in heaven's name is the point of this correspondence? It's hard not to reach the conclusion that there is nobody at the SEC's end who has the common sense of
, who asked: "Are there any such transactions that would understate the bank's capital?"
We're in pretty sad times when bloggers show more common sense than our securities regulators (and I speak as
Don't expect a forthright attitude on this latest example of corporate chicanery from the SEC, the prosecutors who should be all over Bank of America and Lehman, or the Federal Reserve. Especially not the Federal Reserve. In April, the
Wall Street Journal
found that a review of Fed data showed that 18 banks -- including Bank of America,
-- systematically prettied up
. The Fed, passing the buck to the SEC, essentially responded, "What, me worry?"
Now, I'm not saying all these people are completely lacking in prosecutorial zeal. In this space a couple of weeks ago
how the SEC was going to great lengths to prosecute Mark Cuban for acting rationally when told his stock holdings were about to drop into the commode.
What's happening here is fundamental to the way the SEC interprets its reason for existing. Despite all the Obama-era jawboning, the SEC might just as well be run by Harvey Pitt, judging from the agency's attitude toward public-company misconduct and especially accounting misdeeds. The SEC is pretty upfront in its utter indifference to accounting issues -- not in words, of course, but in deeds.
That was made clear in January, when the SEC, reacting to its atrocious handling of the Bernie Madoff scandal, reorganized its enforcement division to focus on the SEC's priorities, which was everything other than corporate misconduct: asset management, market abuse, structured and new products, foreign corrupt practices, and municipal securities and public pensions. Balance-sheet manipulation and accounting trickery in general didn't make the cut. But "market abuse" did, hence the pursuit of the archvillain Cuban while
, such as the one that caused him to sell his stock, continue to rip off investors.
Ah, Camelot. For one brief, shining moment, the president of the United States called for executives to be held accountable for the accuracy of their balance sheets, and there was talk that even tougher measures might be in the works.
That president was George W. Bush.
You think I'm fantasizing? Take a look at
this Time magazine article
. Take a look at the date: almost exactly eight years ago. And look at the title: "Is Pitt's SEC a Toothless Watchdog?" (The answer was, of course, an emphatic "yes.")
Today, Pitt is making the media rounds, rarely reminded of his horrid record at the SEC, and writing articles
such as this one
. An expert on failure describing the failings of a financial bill. I guess it makes sense.
Who was it that said, "Comedy is tragedy plus time?"
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Gary Weiss has covered Wall Street wrongdoing for almost a quarter century. His coverage of stock fraud at BusinessWeek won many awards, and included a cover story, "The Mob on Wall Street," which exposed organized-crime infiltration of brokerages. He uncovered the Salomon Brothers bond trading scandal, and wrote extensively on the dangers posed by hedge funds, Internet fraud and out-of-control leverage. He was a contributing editor at Conde Nast Portfolio, writing about the people most intimately involved in the financial crisis, from Timothy Geithner to Bernard Madoff. His book
Born to Steal
(Warner Books: 2003), described the Mafia's takeover of brokerage houses in the 1990s.
Wall Street Versus America
(Portfolio: 2006) was a hard-hitting account of investor rip-offs. He blogs at garyweiss.blogspot.com.