Apart from the obvious foreign policy failures, and the cronyism, K street crooks and general "culture of corruption" exposed in the past year, the mid-term elections were a signal from most Americans that they are fed up with economic policies (e.g. tax cuts for the rich) that don't deliver broad prosperity.
That's why the new corporate attack on accountability rolled out by the friends of Paulsen last week (the so-called Committee on Capital Markets Regulation) was a bit bizarre. Although it's a bit early to know if or where that effort is directed (perhaps mostly at the SEC), and unlikely the new Congress will bite, it's still troubling that less than 5 years after Enron these guys act as if nothing happened. Apparently they don't know that most of America is pissed off about getting pissed on by "trickle-down" economics. Such are the insular delusions of those at the top.
The piece of CCMR's agenda that struck me as way out there is the claim that "excessive gatekeeper litigation is harmful to shareholders."
What? First of all, have you guys forgotten that the gatekeepers (auditors, banksters, lawyers) not only failed to protect shareholders by signing of on all the book-cooking and fraud, but that in some cases they were the very culprits who designed the scams (special purpose entitites, derivatives, tax fraud vehicles) that so-called "bad apples" like Andy Fastow used to cook the books?
What's even more ridiculous is that this whining about "excessive gatekeeper litigation" is an argument used to pass the very "tort reform" laws (including the Private Securities Litigation Reform Act) that led to Enron, by erecting barriers against defrauded investors, making it harder for them to sue the "aiders and abetters" of fraud in court, thus allowing the green eyeshade "gatekeepers" to change, Dr. Jekyll-like to Mr. "I'll help you hide your debt offshore."
If there's been any increase in litigation, it's only because the incidence of fraud has increased.
Isn't it also ironic that the Big Four are using their status as a virtual cartel to push for a liability shield: A key argument is that the risks the broader market system from aggressive prosecution of any of the Big Four firms is potentially too great: If one of the Big Four firms were to collapse as a result of such prosecution, like Arthur Andersen, it will threaten the entire market system, because the remaining three firms could not possibly pick up so many orphaned clients and complete their audits in time. (The Big Four audit 97 percent of all public companies in America with sales over $250 million.) The industry's argument is therefore an argument that "we're too big to fail." I.e. a cartel.
It's also an oblique admission that they will inevitably get into big trouble -- i.e. in some fashion fail to protect their true clients (investors -- the real owners of corporations).
A few years ago, the industry faced an estimated $50 billion in outstanding claims, and reportedly was having huge problems getting insurance against "catastrophic" risks. (The Economist) Given the industry's precarious status -- by its own admission -- cannot a conservative case easily be made for doing something besides artificially propping up the industry. Yes -- if Congress has guts, it will reject the Paulsen-Greenberg platform and instead place the audit process squarely in the public sphere (perhaps under federal control, in a Federal Bureau of Audits, which would still assign most of the actual work to the accounting firms anyway), an option that was introduced after Enron, but received little attention. (See the "Investor, Shareholder, and Employee Protection Act of 2002," H.R. 3795, 107th Congress)
The new Congress should entertai big, bold proposals designed to protect the public interest, rather than try to bail out another special industry interest and pretend it's doing so for altruistic reasons.