Ummmmm, Sarbanes-Oxley Act of 2002, Public Company Accounting Reform and Investor Protection Act of 2002. The Sarbanes-Oxley Act is arranged into eleven 'titles'.

Periodic statutory financial reports are to include certifications that:


• The signing officers have reviewed the report
• The report does not contain any material untrue statements or material omission or be considered misleading
• The financial statements and related information fairly present the financial condition and the results in all material respects
• The signing officers are responsible for internal controls and have evaluated these internal controls within the previous ninety days and have reported on their findings
• A list of all deficiencies in the internal controls and information on any fraud that involves employees who are involved with internal activities
• Any significant changes in internal controls or related factors that could have a negative impact on the internal controls
Summary of Section 401

Financial statements are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information. These financial statements shall also include all material off-balance sheet liabilities, obligations or transactions.
Summary of Section 404

Issuers are required to publish information in their annual reports concerning the scope and adequacy of the internal control structure and procedures for financial reporting. This statement shall also assess the effectiveness of such internal controls and procedures.

The registered accounting firm shall, in the same report, attest to and report on the assessment on the effectiveness of the internal control structure and procedures for financial reportin
Summary of Section 409

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.

Summary of Section 802

This section imposes penalties of fines and/or up to 20 years imprisonment for altering, destroying, mutilating, concealing, falsifying records, documents or tangible objects with the intent to obstruct, impede or influence a legal investigation. This section also imposes penalties of fines and/or imprisonment up to 10 years on any accountant who knowingly and wilfully violates the requirements of maintenance of all audit or review papers for a period of 5 years

Where is the prosecutorial full court press against the CEO and CFO of Fannie Mae and Freddie Mac?


From Fortune Magazine In January 2005 (This shit has been going on a long time)
http://money.cnn.com/magazines/fortune/fortune_archive/2005/01/24/8234040/index.htm

Also, In March 2005, after Fannie Mae's 10 billion dollar accounting scandal (that somehow escaped SOX prosecution), John McCain introduced a bill the FEDERAL HOUSING ENTERPRISE REGULATORY REFORM ACT OF 2005
"Mr. President, this week Fannie Mae's regulator reported that the company's quarterly reports of profit growth over the past few years were "illusions deliberately and systematically created" by the company's senior management, which resulted in a $10.6 billion accounting scandal.

The Office of Federal Housing Enterprise Oversight's report goes on to say that Fannie Mae employees deliberately and intentionally manipulated financial reports to hit earnings targets in order to trigger bonuses for senior executives. In the case of Franklin Raines, Fannie Mae's former chief executive officer, OFHEO's report shows that over half of Mr. Raines' compensation for the 6 years through 2003 was directly tied to meeting earnings targets. The report of financial misconduct at Fannie Mae echoes the deeply troubling $5 billion profit restatement at Freddie Mac.

The OFHEO report also states that Fannie Mae used its political power to lobby Congress in an effort to interfere with the regulator's examination of the company's accounting problems. This report comes some weeks after Freddie Mac paid a record $3.8 million fine in a settlement with the Federal Election Commission and restated lobbying disclosure reports from 2004 to 2005. These are entities that have demonstrated over and over again that they are deeply in need of reform.

For years I have been concerned about the regulatory structure that governs Fannie Mae and Freddie Mac--known as Government-sponsored entities or GSEs--and the sheer magnitude of these companies and the role they play in the housing market. OFHEO's report this week does nothing to ease these concerns. In fact, the report does quite the contrary. OFHEO's report solidifies my view that the GSEs need to be reformed without delay."

The bill died in the Senate and never came to a vote.

The free market might work if everyone had to stay forever in the game. It can not punish abusers as described when entities can operate with short term goals and/or cheat and then cash out while they are ahead.



It really does only take a few bad apples to screw things up because while they are offering higher profits by getting away with things like not disclosing the risks the are taking, they drive others to do the same just to maintain their business. Competition played a large role in our current fiasco.

Regulation can help level the playiong field.

Regulation, we have regulation, what we don't have is enforcement of the regulations.

Agreed 100%. Anyone that talks about the need for more regulations doesn't understand the problem or the current landscape of regulations. Someone made a good comparison to pre-911 to the fact that you have all these regulatory watch dog systems working as separate entities.

In my last post I wasn't making a distinction. Earlier though I mentioned "less regulation being associated with the Republican Party. Do you know of regulations in place that might have prevented the housing and credit crisis we are now experiencing? Seems even Alice mentioned deregulation though she tried to blame Clinton as much as Republicans.

That’s odd I thought I was replying to Alice’s post

Britain just made a move to regulate naked selling short, which the US is still letting happen willy nilly which is another reason why the market is fluctuating so wildly. You don't have to actually buy the stock when you do this. See the BBC news business section for the article.

Yes that should happen here soon, Naked short selling has been going on with out much notice, but given the last several weeks this can not be ignored any longer.

Which bring up a good point that regulations need to be fluid and evolve to meet the current market practices. What was once a non issue years ago has become a factor in driving down stock prices today. The environment that comprises of market forces is in a state of constant change, the same is needed from oversight and regulations.

Hard to believe we are in a second financial meltdown (This one appearing worse then before) being only 15 years or so out from the last one.

ok, so this is not quite the bottom of the rabbit hole... basically the prices of mortgage securities is going to continue to be written down as long as the housing decline continues and that's going to continue to cause Bad News. keep your eye on the case-shiller index, if there's ever a quarterly increase (that can't be accounted for by seasonal changes) that might be a positive sign