Morning Bell: Did Ken Lay Get to Write Sarbanes-Oxley?
Posted September 23rd, 2008 at 8:52am in Enterprise and Free Markets 
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The $700 billion that Treasury Secretary Hank Paulson is requesting from Congress to restore liquidity in the financial markets is a breathtaking sum of money. But it is also important to remember Paulson has already committed $200 billion to recapitalize Fannie Mae and Freddie Mac. The size of their bailout should tip Americans off: Fannie and Freddie were the key enablers of the mortgage crisis.
Fannie and Freddie’s implicit government stamp of approval on these risky investments fueled Wall Street’s appetite for subprime securities. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. In 2004 alone, Fannie and Freddie bought 44% of all subprime securities. Fannie and Freddie were created to pump more money into the real estate market. Without Fannie and Freddie, it is impossible to see the bubble growing as large as it did.
There were early warning signs. In 2004, a whistle blower revealed Fannie had engaged in Enron-like accounting practices in order to meet profit targets that meant bonuses for CEOs. When conservatives on Capitol Hill moved to rein in Fannie and Freddie, liberals in Congress pushed back, and won as little oversight as possible for their political allies. Key to Fannie and Freddie’s defense was the development of “Partnership Offices” that funneled money into various housing projects in districts of key members of Congress. These efforts were coordinated with corrupt leftist housing advocacy allies like the Association of Community Organizations for Reform Now (ACORN), which has been indicted multiple times across the country for vote fraud.
One would hope now that Freddie and Fannie have exploded that the left learned its lesson about mixing private and public interests. No such luck. Just last week, Senate Banking Chairman Chris Dodd (D-CT), who has taken more money from Fannie and Freddie than any other politician, again defended Fannie and Freddie and advocated for their resurrection.
Now the left has let Dodd author its financial bailout proposal. And again, Dodd is alarmingly eager to funnel taxpayer money to corrupt leftist housing allies. Dodd proposes to direct one fifth of all taxpayer profits from the sale of any assets bought by the Treasury into two trust funds: 65% would go to the Housing Trust Fund and 35% to the Capital Magnet Fund. Both funds are designed to “support a variety of affordable housing initiatives.”
Enron’s financial lies destroyed more than $63 billion in assets. Freddie and Fannie’s financial lies are going to cost the entire world much, much more. When the Senate went to write new accounting legislation after Enron’s collapse, it did not invite disgraced Enron chief executive Ken Lay to draft the legislation. Why on earth is the Senate letting Chris Dodd, both Freddie and Fannie’s biggest defender and benefactor, write this legislation? The integrity of the Senate is at stake. Again.
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11 Responses to “Morning Bell: Did Ken Lay Get to Write Sarbanes-Oxley?”
NEAL RASMUSSEN on September 23rd, 2008 at 8:52am said:
TRIM GOVERNMENT…START WITH THE DEPT OF EDUCATION GO ON TO CUT PENSIONS IN AMOUNT AND START DATE…NOTHING BEFORE AGE 70.WE NEED TO BRING PRICES AND WAGES DOWN AND PRODUCTION UP.
Sam Deakins on September 23rd, 2008 at 8:52am said:
Let me clue you in on Sarbanes-Oxley. The only folks who have to actually comply with these rules are folks like me who are not at the CEO/Coporate Exec level. SoX has made a living Hell for us at the mid-level due to the silly requirements that we have to employ to get anything done. It’s not the folks at my level causing financial problems, it’s the folks at the top who still use their financial chicanery to enrich themselves and boost their ego. SoX has compounded our jobs causing a less efficient use of personnel and resources. Throw SoX out and actually hold folks who legislate and run these financial institutions responsible for their actions. Put them all on a short leash and have a whipping stick handy.
Ken Jarvis – Las Vegas on September 23rd, 2008 at 8:52am said:
GOP against Compensation Caps for Executives
WHY?
Michael J O’Brien –New York on September 23rd, 2008 at 8:52am said:
Taxpayers have already placed at risks some $900bn of taxpayers money to bail out home owners, Fannie and Freddie, AIG. The Congress now wants another $700bn to bail out banks and others for bad assests that cannot be properly valued or priced, and in many cases have less than expected income streams. The administration wants to include car loans, credit cards and other forms of unsecured personal debt. This $700bn is really unlimited and could exceed $1 trillion, with no end in sight.
The treasury wants this passed ASAP, but there is little framework or experience in the private or public sector in such a large and risky undertaking. The democratic congress seeks to limit executive comsensation in this bill while giving proceeds of this effort to liberal housing organizations. This is where we require the very best talent this country has in resolving this crisis, and they should be well rewarded for success.
The total cost to taxpayers including this bill could exceed $1.6 trillion, 10.67 % of GDP, or as high as 20 % of GDP. The effect of this capital drain on the economy can be dangerous and should be more carefully examined.
Congress, especially Senator Dodd, is partially responsible for this mess, and please keep in mind that it was Senator Dood that benefited from a below market rate on a jumbo home loan. He claims he did not know it was a special rate, and that in itself gives a clue to the man’s knowledge of financial markets. Let’s give the taxpayer a break.
Elizabeth, Arizona on September 23rd, 2008 at 8:52am said:
Why are we refusing to let the free economy work? I am tired of paying for other people’s problems!
Mary M. Dunn – Portland, OR 97222 on September 23rd, 2008 at 8:52am said:
My husband and I are in our 70’s and retired. We have both worked hard to educate our children and provide for our retirement. It is demoralizing to see the shenanigans going on with our elected officials and we don’t feel that any of them can be trusted. Many of our friends feel the same way and worry that the money we have set aside in various investments will see us through. What has happened to honesty, integrity and responsible behavior. It makes us sick at heart.
James L (Jim) Frobase Tiffin, Ohio on September 23rd, 2008 at 8:52am said:
Chris Dodd and all these other hoodlums are going to destroy this country. I say “ditto” to Mary Dunn’s comments (sounds exactly like my story) and I would add that I am thinking that Chuck Norris may be correct–there is a revolution coming.
James L. Frobase, retired small business owner.
Thomas Jackson on September 23rd, 2008 at 8:52am said:
This country needs a revolution.
IrishEyes2c, Alabama on September 23rd, 2008 at 8:52am said:
It’s the greedy individuals who run our banks, Wall Street and mortgage companies who created this financial mess. Giving mortgage loans to individuals who could not afford to pay back those loans shows extremely bad common sense as well as a poor business decision, especially when they never asked for financial records from their applicants. Fannie Mae was created by FDR and Freddie Mac is another democratic invention. These are the same people who have supported the Democratic Party for decades by providing campaign funding. Barack Obama as well as other democrats in our current Congress accepted funds from them once again.
When a Democratic majority in Congress, who run the financial and banking committees ignore the warning sign, and especially when the President warned them to look at the signs 17 times during his administration and made the choice to ignore them. Christopher Dodd and Barney Frank are front and center in their ignorance of all the warning signs.
If we did the same thing in a privately held company we would be fired. I think Americans really need to make some easy decisions to remove those who ignored all the warning signs, especially when the President was warning them in advance. The democrats in Congress despise George Bush so much that they ignored his warning and continued to play politics. Now, those same individuals who ignored him are now blaming him. I don’t hold George Bush accountable on hold the Democratic House and Senate accountable as well as their leaders Nancy Pelosi and Harry Reid.
Now once again in watching Congress come up with a plan to have the American public rectify the situation that they caused. Democrats are continually playing political games. They’re adding things onto the Bill which they know on the outset are wrong, but place them on the Bill so that the Republicans and President Bush object to it and most likely will veto the Bill. So, the democrats can continue to point fingers. What they do is so destructive I have to starting thinking that they wanted this to happen so they could blame Bush. But the truth was released about the many times the democratic congress made the choice to ignore it.
So, does America really need to have a President who wants to destroy our economy and finance so the Democrats can take control over everything in our Government? How is that going to help the issues on Wall Street and Main Street, which they cause? From where I’m sitting it shows me once again, they take party over the public. Can America support such egoistical politicians? I know I can and won’t support them. Country First.
John McCain made a positive decision today by returning to the Senate to assist in correcting the financial issues of the United States, while once again Barack Obama picks himself over the Country. Can America afford a President who thinks that way? I don’t think so.
Pat, Boston, MA on September 23rd, 2008 at 8:52am said:
If the concern is Main Street, the better idea is to relocate Wall Street to Main Street, and end the collusion that creates the need for bail outs to fund the ongoing financial extortion of the American people that occurs with Congressional compliance and encouragement, if not the cloak of propriety.
el on September 23rd, 2008 at 8:52am said:
Sarbanes-Oxley:(SOX) or(Sarbox)
Official name is: Public Company Accounting Reform and Protection Act of 2002
Written by Paul Sarbanes (D-MD) and Michael G. Oxley (R-OH)they also sponsored this act.
It was signed into law by President Bush is 2002 and is the result of congress attempting to prevent future corporate fraud such as Enron, WorldCom, etc.
It raises the the accounting standards in areas like corporate governance, securities analysis, and performance of audit.
CEO’s, CFO’s and the Board of Directors can now be held financially responsible for bad bookkeeping or bad management (when shareholder’s money it at stake).
That is why it is amusing for someone to suggest that Ken Lay…(Enron), wrote this legislation.