Thursday, August 04, 2005

Fed's Move to prevent fraud/defalcations is Good--But Why is the Fed doing this?

The Fed's announcement today 'Agencies Propose Rules on Post-Employment Restrictions for Senior Examiners' is a good internal control measure to prevent bank examiners from being bribed with a lucrative employment contract to look the other way when doing bank examinations.

But why is the Fed and other agencies implementing such procedures at this moment? This and other measures should have been implemented a long time ago. Has an examiner been caught who fudged the numbers and subsequently joined the bank he was examining? Has an insidious process of what the Japanese call "amakudari" (descending from heaven) where career bureaucrats retire to lucrative jobs in the private sector taken hold between bank examiners and banks.

Perhaps I am wrong and this measure is a more stringent application of internal controls that operates in the public or private sector. After all people leave accounting firms to work for their clients all the time.

What lays suspicion on the whole matter is that the Fed is the umbrella supervisor to the financial services industry. It is also an organization that defies the checks and balances that our government is build upon--IT IS SELF SUPERVISING!!

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