Monday, May 16, 2005

What’s up?–Greenspan speaks well of .....Sarbanes Oxley

Speaking at Wharton School’s commencement on May 15, 2005 Fed Head Greenspan reiterated his tirade against legislation designed to curtail the–"persecuted minority" (corporations). He pointed out that malfeasance has continued in the face of increased laws and that the market remains the best arbiter of justice:

"But recent corporate scandals in the United States and elsewhere have clearly shown that the plethora of laws and regulations of the past century have not eliminated the less-savory side of human behavior. We should not be surprised then to see a re-emergence of the value placed by markets on trust and personal reputation in business practice. After the revelations of recent corporate malfeasance, the market punished the stock and bond prices of those corporations whose behaviors had cast doubt on the reliability of their reputations. There may be no better antidote for business and financial transgression. But in the wake of the scandals, the Congress clearly signaled that more was needed."

Surprisingly the Fed Head did give an inkling of praise to the recently enacted Sarbanes-Oxley Act:

"The Sarbanes-Oxley Act of 2002 appropriately places the explicit responsibility for certification of the soundness of accounting and disclosure procedures on the chief executive officer, who holds most of the decisionmaking power in the modern corporation. Merely certifying that generally accepted accounting principles were being followed is no longer enough. Even full adherence to those principles, given some of the imaginative accounting of recent years, has proved inadequate. I am surprised that the Sarbanes-Oxley Act, so rapidly developed and enacted, has functioned as well as it has. It will doubtless be fine-tuned as experience with the act's details points the way."

Although the chairmans comments were a tepid compliment, they were a compliment and stand in sharp contrast to his general view of legislation. They also contradict his strong statements against more legislation in the immediate aftermath of the Enron crisis.
The chairman also emphasized the need for character and trust in business dealings. Obviously this trust and character does not pertain to his relationship of the less well to do and poor in our country that have placed trust in institutions such as the Federal Reserve that are suppose to act in the interests of all Americans in mind.

To read the full speech:

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