This one almost fell through the cracks. Politico was live blogging a meeting between President Obama and his “jobs council”, which is really a collection of CEOs, which includes Jeffrey Immelt who is in bed with the bankers who destroyed our economy.
Here’s what they had to say about Sarbanes-Oxley:
With regards to regulatory reform, Obama says the administration is already in the process of a “look back” that has identified billions of dollars in potential savings, Obama says. (12:12 p.m.)
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After several members of the panel take turns speaking, Obama poses a question to his jobs council: “Have we begun to engage with both the relevant congressional committees but also … the relevant agencies to see how we can get those carve outs you described?”
He adds, “If you’ve got smaller companies, they’re not going to have the legal and accounting help at the costs, at the magnitude, that GE’s going to have, if it decides it’s going to go into capital markets,” and asks, “Do we have a set of concrete proposals on how a carve out like that might look like?” (12:27 p.m.)
The president adds that he would like to know what “tweaks” would need to be made to the Sarbanes-Oxley Act. (12:28 p.m.)
What is Sarbanes-Oxley? It was a law enacted in 2002 that prohibits publicly traded companies from cooking their books. Firms like Enron, Tyco International, and WorldCom used accounting tricks to defraud investors. These companies looked like healthy, profitable companies on their balance sheets, but the truth was that the CEOs were hollowing them out and it was nothing more than smoke and mirrors. Investors, including retirement accounts, were tricked into buying failing companies that were valued as great investments and workers got the shaft when the house of cards came tumbling down.
It’s obvious why a group of corporate CEOs would want to remove regulations that prevent companies from committing fraud, but why would the President? I assume it’s the same reason why his “stimulus” ideas include tax cuts rather than work programs. It’s the reason he hand picked a “jobs council” packed with CEOs. It’s the same reason he attacked Social Security by cutting the payroll tax.
Based on his actions, the President genuinely believes in supply-side Reaganomics. Rather than going with demand side solutions to the demand problem we have in the United States, the President is going with tax cuts, deregulation, and trickle-down. The problem isn’t that the wealthy have dismantled our manufacturing infrastructure and forced down wages through union busting and outsourcing. The problem isn’t that big banks committed fraud and are now collecting interest from their bailout funds rather than loaning out the money. The problem isn’t that corporations aren’t hiring people because there’s no demand for their products.
The problem is that the investor class won’t invest in companies unless those companies can lie about their finances to give the appearance that they are good investments. Those companies can’t hire people because of the onerous financial requirement that they can’t commit fraud and have to certify that they’re not criminal enterprises.
That’s where President Obama is coming from.
In its most recent interim report, the Jobs Council took aim at what it saw as a problem: the investor-protection laws, notably Sarbanes-Oxley, created in the wake of the disasters at Enron and WorldCom. The council suggests exempting U.S. companies with a market capitalization of $1-billion or less, or, alternatively, giving companies a five-year pass from Sarbanes-Oxley from the date they go public.
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It has come to this, then: In the all-consuming desire to do something, nearly anything, to promote job creation, Mr. Obama seems willing to gut one of the most significant investor protections of our time. If the anti-Sarbanes Oxley proposal succeeds, it is the Americans – and Canadians – who invest in U.S. stocks who will lose.
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The Jobs Council is taking aim at all of it, suggesting rules be “right-sized” to exempt all but the largest companies. “Well-intentioned regulations aimed at protecting the public from the misrepresentations of a small number of large companies have unintentionally placed significant burdens on the large number of smaller companies,” the Jobs Council said in its interim report.
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The Jobs Council, however, in suggesting a $1-billion market cap, would exempt nearly two-thirds of the roughly 5,700 public companies on the major U.S. stock exchanges.
The Pittsburg Post Gazzette reported on this on October 16th:
Critics say rolling back the protections will create something other than jobs.
“All you’re going to do is have more fraud. The ultimate losers are going to be investors,” said Jeff Klink, a former federal prosecutor whose Gateway Center firm helps clients prevent and detect fraud.
Barbara Roper, of the Consumer Federation of America, found the proposal short on reasoning and long on irony.
“The Jobs Council looks at jobs losses that are the direct result of a financial crisis brought on by weak financial regulation and proposes as a solution further weakening regulations,” she said.
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“The logic of such a proposal seems to be that companies with over $1 billion market caps might cook their books, but those under $1 billion market cap are as pure as the driven snow. I don’t buy this at all,” said Penn State accounting professor Ed Ketz.
“Plenty of small companies have folded because of embezzlement and accounting fraud. Ask any forensic accountant.”
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Although some say evildoers will find their way around the law, Mr. Klink believes that SOX is working.
“Anyone who says SOX doesn’t work is being disingenuous or doesn’t like the fact that it’s a pain in the neck,” he said.
While the corporate media would like to paint the Occupy Wall Street movement as liberals mobilizing in support for President Obama’s reelection or to cite it as good news for Democrats, it’s hard to see how that’s possible considering just how in bed the President and the Democratic Party are with the top 1% who wrecked the economy. The President seems dedicated to insulating them from the people on the streets rather than prosecuting them for their fraud.
Matt Taibbi has this story on his radar, so I expect we’ll get more details soon.
Tags: fraud, obama, Sarbanes-Oxley
