Audit Notes: Reform Report Card, Bhopal vs. BP, “Power Problem”

Barry Ritholtz’s very helpful report card on financial reform.

Up top, he gives the bill a big fat “F” on too big to fail. Richly deserved. Money quote:

The crisis legacy is a financial services sector that is highly concentrated with dramatically reduced competition. The six largest financial firms — combined assets: $9.4 trillion — will still dominate the industry. Too-Big-to-Fail remains the law of the land.

Also flunking: Leverage requirements (which Ritholtz says “inexplicably” are ignored), compensation, and credit-ratings reform.

He gives the new mortgage-underwriting standards an “A”:

Establishes new minimum underwriting standards for mortgages. No more no doc, NINJA, or Liar loans. Lenders must verify income, credit history and job status. Would ban payments to brokers for steering borrowers to high-priced loans. Of all the regulatory changes passed today, this seems to be the only one that, if in place a decade ago, would have prevented (or at least dramatically reduced) the crisis.

The New York Times is smart to revisit the Bhopal catastrophe and response and compare it to the BP (and U.S. government) response in the Gulf:

In 1984, a leak of toxic gas at an American company’s Indian subsidiary killed thousands, injured tens of thousands more and left a major city with a toxic waste dump at its heart. The company walked away after paying a $470 million settlement. The company’s American chief executive, arrested while in India, skipped bail, never to return. This month eight former senior officials from the company, including one who has since died, were convicted of negligence, but the sentence — two years in jail — seems paltry to many here compared to the impact of their crime.

No matter how halting the Obama administration’s response to the gushing oil spill in the Gulf of Mexico might look to Americans, Indians cannot help but marvel — and envy — the alacrity with which the United States government has acted.

BP’s $20 billion cleanup fund, as vast a sum as it seems from here, is in all likelihood merely a down payment on what the company will probably pay for the damage caused by the oil spill in the Gulf of Mexico. A criminal investigation has begun. And while the environmental toll is huge, the cost in human lives, compared with Bhopal, has been minimal.

For more on the Bhopal scandal, read a couple of posts I wrote back in 2008 on Bhopal, the Times, and Dow Chemical.

— In Audit news, our very own Dean Starkman snagged another award today for his “Power Problem” cover story on the failures of the business press in the pre-crisis years.

“Power Problem” is the winner in the National Press Club’s print Press Criticism category. Dean picked up a Mirror Award for the piece a couple of weeks ago and won the Bart Richards Award for Media Criticism in March.

Here’s what the NPC had to say:

The piece challenged the business press’ assertion that it had warned of a coming financial collapse when, in fact, the press didn’t stay with the story. Starkman used a quantitative approach to try to assess whether the thousands of articles written on the financial system too often missed the mark. The database used in analyzing the coverage showed the value of going beyond the anecdotal approach in media criticism.

Still haven’t read “Power Problem”? Purchase the PDF here for less than the cost of some Lady Gaga ringtone that’ll just make everybody hate you.

And we’ll throw in The List, a database of 727 notable business-press stories, gratis.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.